The long-run average cost curve of a natural monopoly
A) is positively sloped until it crosses the demand curve.
B) intersects the demand curve while it is negative sloped.
C) intersects the demand curve while it is positively sloped.
D) is the natural monopoly's supply curve.
E) is the same as the natural monopoly's demand curve.

Question

Quizplus · Accepted Answer

The long-run average cost curve of a natural monopoly intersects the demand curve while it is negatively sloped, indicating that the monopoly can produce at a scale where average costs are decreasing and still meet market demand. This characteristic allows the natural monopoly to efficiently provide services or goods that would be less efficiently produced if there were multiple providers, due to the high fixed costs and economies of scale involved.

The Long-Run Average Cost Curve of a Natural Monopoly