Which of the following is true of a natural monopoly? A

Marketing Dec 28, 2020

Which of the following is true of a natural monopoly?

A. The firm can supply the entire market at a lower cost than could two or more firms.

B. Its average total cost curve slopes upward as it intersects the demand curve.

C. The firm is not protected by any barrier to entry.

D. Economies of scale exist to only a very low level of output.

Expert Solution

The correct option is:

A. The firm can supply the entire market at a lower cost than could two or more firms.

A natural monopolist enjoys cost advantages that other firms do not have in the market. These firms enjoy advantages of higher initial investments that other firms cannot make up in the due course of time, economies of scale, and first-mover advantage.

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