The efficient scale of one firm is 20 units and the average total cost at the efficient scale is $30.The quantity demanded in the market as a whole at $30 is 40 units.This market is
A) a natural duopoly.
B) a legal duopoly.
C) a natural monopoly.
D) a legal monopoly.
E) monopolistically competitive.

Question

Quizplus · Accepted Answer

Given that the efficient scale of production for a firm is 20 units and the total market demand at the price that corresponds to this efficient scale ($30) is 40 units, it implies that the market can sustainably support two firms operating at their efficient scale. This scenario is indicative of a natural duopoly, where the market conditions naturally limit the number of firms that can efficiently operate in the market to two.

The Efficient Scale of One Firm Is 20 Units and the Average