Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:
A) sunk costs.
B) location.
C) economies of scale.
D) government restrictions.

Question

Quizplus · Accepted Answer

The monopoly results from economies of scale because the average cost decreases as production increases, allowing the firm to produce at a lower cost per unit than competitors.

Suppose That You Build a New Jumbo Jet That Can