Suppose the technology of an industry is such that the typical firm's minimum efficient scale is 18 units per day at an average long-run cost of $1600 per unit.If the total quantity demanded at a price of $1750 per unit is 16 units per month,the likely result would be

Question

Quizplus · Accepted Answer

The minimum efficient scale of 18 units per day implies that the industry is characterized by economies of scale. The total quantity demanded at a price of $1750 per unit is only 16 units per month, which is less than the minimum efficient scale of a typical firm. This implies that there is not enough demand to support more than one firm in the industry. As a result, the likely result would be a natural monopoly, where a single firm would be able to produce the entire output of the industry at a lower cost than any potential competitors.

Suppose the Technology of an Industry Is Such That the Typical