If the technology for producing a good enables one firm to meet the entire market demand at a lower average total cost than two or more firms could,then that firm has
A) patented the market.
B) a natural monopoly.
C) increasing average total costs.
D) a legal barrier to entry.
E) a discriminatory monopoly.

Question

Quizplus · Accepted Answer

This is the definition of a natural monopoly. Due to the technology used to produce the good, it is more efficient for only one firm to produce and sell the good, rather than having multiple firms in the market. This results in barriers to entry for potential competitors, as they would not be able to compete with the lower average total cost of the natural monopolist.

If the Technology for Producing a Good Enables One Firm