The diagram below shows the market demand curve and the cost curves for a single firm. FIGURE 12- 6
-Refer to Figure 12- 6. The firm depicted in the figure is
A) an oligopoly.
B) a perfectly competitive firm.
C) a natural monopoly.
D) a monopolistically competitive firm.
E) a cartel.

Question

The diagram below shows the market demand curve and the cost curves for a single firm.  FIGURE 12- 6
-Refer to Figure 12- 6. The firm depicted in the figure is
A) an oligopoly. 
B) a perfectly competitive firm. 
C) a natural monopoly. 
D) a monopolistically competitive firm. 
E) a cartel.

Quizplus · Accepted Answer

The cost curves indicate that the firm experiences economies of scale, which is a characteristic of a natural monopoly. The fact that the demand curve is relatively flat indicates that there are few substitutes available for the good or service, further supporting the classification as a natural monopoly.

The Diagram Below Shows the Market Demand Curve and the Cost