auestiIoh Not yet saved Marked out of 100 P Flag question Fo

auestiIoh Not yet saved Marked out of 1.00 P Flag question For a natural monopoly, economies of scale Select one: A. exist alo ng the long-run average cost curve at least until it crosses the market demand curve. B. as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve C. and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. D. lead to a legal barrier to entry. O E. are totally absent. Next page General Students

Solution

Q1. Option A.

For a natural monopoly,Economies of scale.

Exist along the long run average cost curve atleast until it

crosses the market demand curve.

In a natural monopoly, gives the firm Economies of scale at which the firm would break even in the long run

Which exist along the long run average cost curve

Until it crosses the market demand curve.

Therefore a given quantity of out put is produced more cheaply by one single firm

Rather than two or more smaller firms.

Q2. Option A is correct

Once a monopoly has determined how much it produces,

it will charge a price that

Is determined by its demand curve.

A monopoly produces out put by decreasing the price it charges.

Demand curve faced by monopoly in the market demand

And it is downward sloping

So that a monopolist competitor can rise its prices

Or lower the prices and gain more customers.