A(n) ________ results when costs are decreasing in the scale of output or in the scope of the set of goods a firm produces.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when the larger the scale of output, the lower the average total cost. In other words, a single firm can produce the entire market output at a lower cost than multiple smaller firms. This is typically seen in industries with high fixed costs, such as utilities or transportation. Therefore, decreasing costs in the scale of output is a characteristic of a natural monopoly.

A(n) ________ Results When Costs Are Decreasing in the Scale