The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-Which of the following refers to a natural monopoly?
A)A monopoly resulting from government control
B)A monopoly resulting from economies of scale
C)A monopoly resulting from output leadership
D)A monopoly resulting from a large advertising budget
E)A monopoly resulting from trade restrictions

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-Which of the following refers to a natural monopoly?
A)A monopoly resulting from government control 
B)A monopoly resulting from economies of scale 
C)A monopoly resulting from output leadership 
D)A monopoly resulting from a large advertising budget 
E)A monopoly resulting from trade restrictions

Quizplus · Accepted Answer

A natural monopoly is one where a single firm can supply the entire market at a lower cost than two or more firms. This is typically due to economies of scale, where the cost of producing each unit of output decreases as output increases. Therefore, the correct choice is B, which refers to a monopoly resulting from economies of scale. The other choices do not refer to a natural monopoly.

The Figure Given Below Shows the Aggregate Demand and Supply