Refer to the information provided in Figure 13.8 below to answer the question that follows. Figure 13.8
-Refer to Figure 13.8. The only firm producing electricity has the long-run average total cost curve shown. The total amount of demand for kilowatts is 100,000 per hour. It makes economic sense for this firm to be the only producer of electricity because this firm
A) must be realizing economies of scale in producing electricity.
B) must have a patent on the production process necessary to produce electricity.
C) must have control over a scarce factor of production.
D) must have a government franchise to produce electricity.

Question

Refer to the information provided in Figure 13.8 below to answer the question that follows.  Figure 13.8
-Refer to Figure 13.8. The only firm producing electricity has the long-run average total cost curve shown. The total amount of demand for kilowatts is 100,000 per hour. It makes economic sense for this firm to be the only producer of electricity because this firm
A) must be realizing economies of scale in producing electricity. 
B) must have a patent on the production process necessary to produce electricity. 
C) must have control over a scarce factor of production. 
D) must have a government franchise to produce electricity.

Quizplus · Accepted Answer

This firm is likely experiencing economies of scale, as indicated by the long-run average total cost curve, which suggests that the average cost of production decreases as the quantity of output increases. This makes it more efficient for one firm to produce the total demand for electricity, rather than having multiple firms.

Refer to the Information Provided in Figure 13