Which of the following statements is false regarding a natural monopoly?
A)The minimum efficient scale is larger than the size of the market.
B)The average total cost declines over the entire range of output.
C)One firm can supply the entire market at a lower cost than two firms can.
D)Fixed costs are very large compared to variable costs.
E)Diseconomies of scale exist at a very low output level.

Question

Quizplus · Accepted Answer

The statement "diseconomies of scale exist at a very low output level" is false. A natural monopoly experiences economies of scale throughout its entire range of output, which is why it is able to supply the entire market at a lower cost than multiple firms could.

Which of the Following Statements Is False Regarding a Natural