What is most likely to happen as the output of a natural monopoly increases over the range of market demand?
A)There is a small decrease in average total cost and then it increases as output increases.
B)There is an increase in average total cost and then it decreases as output increases.
C)Average total cost increases as output increases.
D)Average total cost decreases as output increases.

Question

Quizplus · Accepted Answer

In a natural monopoly, average total cost decreases as output increases due to economies of scale. This means that as the company produces more, the cost of producing each additional unit falls.

What Is Most Likely to Happen as the Output of a Natural