Which of the following statements is TRUE?
I. Prices in a competitive market will always be lower than the prices charged by a natural monopolist.
II. A natural monopolist arises because of its ability to reduce average costs with large-scale production methods.
III. A natural monopoly is a firm that can demand more inputs without increasing its costs of production.
A) I and II only
B) II only
C) III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Statement II is true, as a natural monopoly arises due to its capacity to lower average costs with a large-scale production. Statement I is not always true because the cost and pricing choices of a competitive market and a natural monopolist may depend on the industry, and Statement III is false because increasing inputs will lead to higher costs of production for a natural monopoly.

Which of the Following Statements Is TRUE