For a natural monopoly,economies of scale
A) exist along the long-run average cost curve at least until it crosses the market demand curve.
B) and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve.
C) lead to a legal barrier to entry.
D) as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve.
E) are totally absent.

Question

Quizplus · Accepted Answer

Economies of scale exist along the long-run average cost curve for a natural monopoly until it intersects with the market demand curve. Beyond this point, diseconomies of scale may start to appear. This is due to the fact that the market demand curve limits the amount of output the monopoly can sell, which reduces the firm's ability to take advantage of economies of scale beyond a certain point.

For a Natural Monopoly,economies of Scale