A firm is a natural monopoly if ________. A. it can produce ...

[bobbie]

A firm is a natural monopoly if ________.
 
  A. it can produce the good at a price below its competitor's price
  B. it can produce a larger quantity of the good than other firms could
  C. the government grants it a public franchise or patent
  D. it can satisfy the market demand at a lower average total cost than other firms can

Question 2

Using Figure 10.2 determine the number of workers that a representative firm would wish to hire. Explain your answer.
 
  What will be an ideal response?

[momolu]

Answer to Question 1

D Answer D is the definition of a natural monopoly.

Answer to Question 2

A competitive firm using only one variable factor of production will use that factor as long as its marginal revenue product exceeds its unit cost. A perfectly competitive firm will hire labor as long as MRPL is greater than the going wage, W. The hypothetical firm will demand 2100 units of labor.