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

-When long-run average costs are declining for the entire range of demand, the firm is known as a(n):
A)local monopoly.
B)regulated monopoly.
C)monopolistically competitive firm.
D)natural monopoly.
E)oligopoly.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-When long-run average costs are declining for the entire range of demand, the firm is known as a(n):
A)local monopoly. 
B)regulated monopoly. 
C)monopolistically competitive firm. 
D)natural monopoly. 
E)oligopoly.

Quizplus · Accepted Answer

A firm that experiences declining long-run average costs for the entire range of demand is a natural monopoly. This means that the firm can produce the entire output demanded by the market at a lower cost than any potential competitor. Therefore, it is more efficient for the market to be served by one firm rather than multiple firms. Examples of natural monopolies include utility companies and transportation infrastructure.

The Figure Given Below Shows the Aggregate Demand and Supply