CFA Practice Question
Natural monopoly exists when ______
A. one firm can supply the entire quantity demanded at a lower cost than two or more firms.
B. one firm can supply the entire quantity demanded at the same cost as two or more firms.
C. the long-run average cost curve exhibits constant returns to scale.
Explanation: Average costs are continually falling for a natural monopolist. Thus, one firm can produce at a lower per-unit cost than can two or more firms.
User Contributed Comments 1
| User | Comment |
|---|---|
| chuong | ECONOMT TO SCALE |