Firm A is a monopoly because of network effects,whereas Firm B is a natural monopoly.Which of the following statements is likely to be true in this context?
A) The average total costs of both firms decrease as they increase their output.
B) The value of the product that both firms produce increases with an increase in the number of buyers.
C) Firm A enjoys a monopoly status because its marginal cost decreases with increase in output, whereas Firm B enjoys a monopoly status because the value of its product increases as more consumers buy it.
D) Firm B enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm A enjoys a monopoly status because the value of its product increases as more consumers buy it.

Question

Quizplus · Accepted Answer

Firm B is a natural monopoly because its average total cost decreases with increased output, while Firm A is a monopoly due to network effects, meaning the value of its product increases as more consumers buy it.

Firm a Is a Monopoly Because of Network Effects,whereas Firm