When understanding production cost in economics the return generated by the investment (cost) is understood to be marginal in nature and diminishing

Economics May 17, 2021

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

Expert Solution

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.

PFA

Download Solution Attachment (PDF/Doc)

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote