Figure 11-8 Given the average cost curve shown in Figure 11-8 for dry cleaning, where Q₁ is the quantity demanded in a small town, and Q₂ for a larger town, you would expect dry cleaning to be a monopoly A)in a small town, but not a large one. B)in both large and small towns. C)in a large town, but not a small one. D)only if the process is patented.

Question

Quizplus · Accepted Answer

The average cost curve is decreasing throughout the quantity demanded in a small town, indicating economies of scale. However, in a larger town, the average cost curve starts increasing beyond a certain quantity demanded, indicating diseconomies of scale. This suggests that in a small town, a single firm could take advantage of economies of scale and become a monopoly, but in a larger town, multiple firms might enter the market due to the presence of diseconomies of scale. The information provided does not suggest anything about patents, so option D is not relevant.

Figure 11-8 Given the Average Cost Curve Shown in Figure 11-8 for Figure