As the demand for a product falls, it is not uncommon for the industry to become a monopoly.This is most likely due to
A)an increase in the number of barriers.
B)legal restrictions being imposed.
C)the surviving firm operating on the declining part of its average cost curve.
D)patent protection causing high prices.

Question

Quizplus · Accepted Answer

As demand falls, firms will have excess capacity and higher costs per unit. The firms that are able to survive and continue operating will be doing so on the declining part of their average cost curve, which means they are able to lower their prices and potentially drive out any remaining competitors. This can lead to a monopoly in the industry. Barriers to entry, legal restrictions, and patent protection may play a role in creating and maintaining a monopoly, but they are not necessarily the most likely reasons in this scenario.

As the Demand for a Product Falls, It Is Not