Question

Which of the following is a characteristic of a natural monopoly?

A. Average cost exceeds marginal cost over large regions of output.
B. Increasing the number of firms increases each firm’s average total cost.
C. One firm can supply output at a lower cost than two firms.
D. All of the above are correct.

Answer 1

Answer: D.

Step-by-step explanation:

Natural monopoly exists when very high start up capital is needed for conducting business in a particular industry. Natural monopoly also occurs when a particular firm covers a whole market at lower cost better than other firms even when they combine together.