The diagram below shows the market demand curve and the cost curves for a single firm. FIGURE 12-6
-Refer to Figure 12-6.The firm depicted in the figure is
A)a perfectly competitive firm.
B)a monopolistically competitive firm.
C)a natural monopoly.
D)an oligopoly.
E)a cartel.

Question

The diagram below shows the market demand curve and the cost curves for a single firm.  FIGURE 12-6
-Refer to Figure 12-6.The firm depicted in the figure is
A)a perfectly competitive firm. 
B)a monopolistically competitive firm. 
C)a natural monopoly. 
D)an oligopoly. 
E)a cartel.

Quizplus · Accepted Answer

The firm depicted on the graph is experiencing economies of scale up to the point where it reaches its minimum efficient scale (MES), after which it experiences diseconomies of scale. This is a characteristic of a natural monopoly, where a single firm can produce the entire output of the industry at a lower cost than multiple firms could. The demand curve on the graph is relatively flat, indicating that there are no close substitutes for the firm's product, another indication of natural monopoly.

The Diagram Below Shows the Market Demand Curve and the Cost