A defining characteristic of a natural monopoly is that A

Marketing Dec 28, 2020

A defining characteristic of a natural monopoly is that

A. it exists because of legal barriers to entry.

B. it has no close substitutes.

C. its average total cost curve slopes downward as it intersects the demand curve.

D. its demand curve slopes downward.

Expert Solution

The correct option is C. Its average total cost curve slopes downward as it intersects the demand curve.

The natural monopoly is one of the types of monopoly market in which a firm achieves powerful economies of scale or has a huge setup cost for conducting business in the industry. Also, the natural monopolist might be the single provider of a particular product at a specific location. Therefore, the natural monopolist will always face a downward sloping average total cost as it intersects with the demand curve.

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