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Homework answers / question archive / When understanding production cost in economics the return generated by the investment (cost) is understood to be marginal in nature and diminishing
When understanding production cost in economics the return generated by the investment (cost) is understood to be marginal in nature and diminishing. This is explained in the law of diminishing marginal returns. However, the specific way this occurs varies by the nature of the market a business is in. Review the graphs below and select the long run-average cost curve which demonstrates a natural monopoly.
options:
Graph 1
Graph 2
Graph 4
Graph 3
Answer:
Graph 4
Explanation: In the case of a natural monopoly, the long-run average costs keeps falling over a large range of output. This happens in graph 4.
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