Author Question: If the average cost curve for an individual firm is decreasing when it intersects the market demand ... (Read 62 times)

tfester · **on:** Jul 1, 2018

If the average cost curve for an individual firm is decreasing when it intersects the market demand curve, why is a natural monopoly likely to develop in this market? Explain.

What will be an ideal response?

Question 2

The forecasting method that involves using an average of past observations to predict the future (if the forecaster feels that the future is a reflection of some average of past results) is the

A) moving average method.
B) econometric forecasting method.
C) exponential smoothing method.
D) Both A and B
E) Both A and C

BUTTHOL369 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Perfect competition leads to firms increasing size until reaching the minimum of the AC curve. If firms naturally did so, before reaching this size, a single firm would be left in the market. That firm will no longer need to act as a price-taker as its size gives it cost advantages over potential entrants.

Answer to Question 2

E