An industry in which one firm can achieve economies of scale over the entire range of output is referred to as:

Question

Quizplus · Accepted Answer

A natural monopoly is an industry in which a single firm can produce the entire output demanded by the market while facing a declining average cost curve over the entire range of output. This means that as the firm produces more, its average cost per unit decreases, leading to economies of scale. Therefore, a natural monopoly is the only industry in which one firm can achieve economies of scale over the entire range of output, making A the correct choice. Perfectly competitive markets do not experience economies of scale, neutral monopoly is not a recognized term in economics, and contestable markets may have low barriers to entry leading to the possibility of multiple firms achieving economies of scale.

An Industry in Which One Firm Can Achieve Economies of Scale