When a firm has a natural monopoly,what effect does the firm experience
A)Its marginal cost always exceeds its average total cost.
B)Its total-cost curve is horizontal.
C)Its average-total-cost curve is downward sloping.
D)It has scale economies over a small scale of output.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can provide a good or service at a lower cost than any potential competitor. This is typically due to economies of scale, which means that the firm experiences lower average total costs as it produces more output. As a result, the firm's average-total-cost curve is downward sloping, indicating that it becomes more efficient as it produces more. However, because the firm is the only one in the market, it is able to charge a price that is higher than its marginal cost, allowing it to earn economic profits.

When a Firm Has a Natural Monopoly,what Effect Does the Firm