Figure 10-15
Figure 10-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-15.Erickson Power is a natural monopoly because
A) it is a power company and all power companies are natural monopolies.
B) average total cost is still declining when it intersects demand.
C) of its continually declining marginal revenue curve as output rises.
D) its marginal cost lies entirely below its long-run average cost.

Question

Figure 10-15
  Figure 10-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-15.Erickson Power is a natural monopoly because
A) it is a power company and all power companies are natural monopolies. 
B) average total cost is still declining when it intersects demand. 
C) of its continually declining marginal revenue curve as output rises. 
D) its marginal cost lies entirely below its long-run average cost.

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than multiple firms, typically because average total costs continue to decline over the range of market demand.

Figure 10-15 Figure 10-15 Shows the Cost and Demand Curves