If a single firm can meet the entire market demand at a lower average total cost than a larger number of smaller firms,the single firm is
A) price discriminating.
B) a natural monopoly.
C) a legal monopoly.
D) efficient when profit maximizing.
E) an ownership-of-the-market monopoly.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can produce output at a lower average total cost than a larger number of smaller firms. This is typically due to economies of scale, where the cost per unit decreases as production increases. A natural monopoly is not necessarily price discriminating or a legal monopoly, and while it may be efficient when profit maximizing, this is not a defining characteristic. There is also no such thing as an "ownership-of-the-market monopoly."

If a Single Firm Can Meet the Entire Market Demand