Figure 8.12
-Figure 8.12 shows a demand and costs of an unregulated monopoly. The negatively sloped long-run average cost curve reflects that

Question

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The negatively sloped long-run average cost curve reflects that there exist large economies of scale in production. As the firm increases its output, it benefits from lower unit costs of production due to economies of scale. The fact that the curve is negatively sloped means that the per-unit cost of production decreases as output increases, indicating that there are significant economies of scale in the production process. Choices A and B are not sufficient to explain the shape of the long-run average cost curve.

Figure 8.12 -Figure 8.12 Shows a Demand and Costs of an Unregulated