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Author Question: What is a natural monopoly?[br][br][b][color=black]Question 2[/color][/b][br][br]Some competitive ... (Read 81 times)

cookcarl

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on: Jun 30, 2018
What is a natural monopoly?

Question 2

Some competitive firms are willing to operate at a loss, in the short run, because:
 a. their average variable cost is less than the price.
  b. their fixed costs are less than their current losses.
  c. their average total cost is less than the price.
  d. they do not attempt to maximize profits or minimize losses.
  e. their revenues are at least able to cover their fixed costs.


gabrielle_lawrence

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Reply #1 on: Jun 30, 2018
Answer to Question 1

The situation in which technology makes long-run competition impossible is called natural monopoly. In this case long-run average cost curve declines all the way up to the size of the market. Decreasing long-run average costs are inherent in the industry's technology such that a single producer can supply to the entire market. Competition in such cases in not only impossible but inefficient.

Answer to Question 2

a


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