If large fixed costs result in ATC falling as output increases, this industry is referred to as a:
A)constant-cost industry.
B)natural monopoly.
C)network externality.
D)profit-maximizer.

Question

Quizplus · Accepted Answer

A natural monopoly is an industry in which large fixed costs result in ATC falling as output increases. This is because the fixed costs are spread over a larger number of units of output, resulting in a lower ATC.

If Large Fixed Costs Result in ATC Falling as Output