We call a firm a natural monopolist when its LRAC curve ________ when the LRAC intersects the market demand curve.
A) is horizontal
B) becomes negative
C) is rising
D) is still declining

Question

Quizplus · Accepted Answer

A firm is considered a natural monopolist when its long-run average cost (LRAC) curve is still declining at the point where it intersects the market demand curve. This implies that the firm can produce the total quantity demanded in the market at a lower average cost than any combination of smaller firms, leading to economies of scale.

We Call a Firm a Natural Monopolist When Its LRAC