A natural monopoly occurs when
A)patents protect a firm from competition
B)copyrights protect a firm from competition
C)advertising costs exceed fixed costs
D)marginal cost exceeds marginal revenue
E)average costs decrease over the whole range of market output

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can produce the entire output of the market at a lower cost than any potential competitors. This typically occurs when there are significant economies of scale, resulting in a long-run average cost curve that continually decreases over the entire range of market output. Therefore, the best choice is E – average costs decrease over the whole range of market output.

A Natural Monopoly Occurs When