In a natural monopoly,the long-run average cost curve
A)is downward sloping in the relevant range of output levels.
B)is horizontal in the relevant range of output levels.
C)is upward sloping in the relevant range of output levels.
D)may be either upward sloping or downward sloping in the relevant range of output levels.
E)lies below the marginal cost curve.

Question

Quizplus · Accepted Answer

In a natural monopoly, the long-run average cost curve is downward sloping in the relevant range of output levels due to economies of scale. This means that as output increases, the cost per unit of production decreases. Therefore, the monopolist can produce at a lower cost than any potential competitor, making it a natural monopoly.

In a Natural Monopoly,the Long-Run Average Cost Curve