'When a single firm can supply the entire market at a lower cost than two or more firms, the firm can be said to have which of the following characteristics?
A) It must be producing at the socially optimal level of output.
B) It is a natural monopoly.
C) The marginal cost curve rises at an increasing rate.
D) It is one of two firms in the industry.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than two or more firms. This is due to economies of scale, where the cost of producing each additional unit decreases as the level of output increases. In this case, the firm can operate more efficiently than multiple firms in the same industry, making it a natural monopoly.

'When a Single Firm Can Supply the Entire Market at a Lower