A firm that is a natural monopoly will:
A) attempt to break even, not profit-maximize.
B) maximize profit by producing where MR = MC.
C) face increasing costs of production.
D) face greater market instability than a regular monopoly.

Question

Quizplus · Accepted Answer

A natural monopoly is a firm that has no close substitutes and faces decreasing costs of production. This means that the firm can produce more output at a lower cost per unit. As a result, the firm will profit-maximize by producing where MR = MC.

A Firm That Is a Natural Monopoly Will