A firm is more likely to have a natural monopoly when: the size of the market is small relative to the efficient scale of the firm. the size of the market is large relative to the efficient scale of the firm. the firms face no or low fixed costs. the government grants the firm an exclusive license to operate.
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A natural monopoly occurs when a single firm can produce a good or service at a lower cost than multiple firms due to economies of scale. This means that as the firm produces more output, its average costs decrease. Show more…
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For a natural monopoly to exist: A. A firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. B. A firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. C. A firm must continually buy up its rivals. D. A firm must have a government-imposed barrier.
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A firm that is a natural monopoly a. is not likely to be concerned about new entrants eroding its monopoly power. b. is taking advantage of economies of scale. c. would experience a higher average total cost if more firms entered the market. d. All of the above are correct.
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A firm is a natural monopoly if it exhibits the follow- ing as its output increases: a. decreasing marginal revenue. b. increasing marginal cost. c. decreasing average revenue. d. decreasing average total cost.
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