The problem posed by a natural monopoly is that it faces a _____ This means that _______?
Correct answer: D. decreasing average cost curve, marginal cost lies below average cost
- A. increasing average cost curve, marginal cost lies above average cost
- B. increasing average cost curve, marginal cost lies below average cost
- C. decreasing average cost curve marginal cost lies above average cost
- D. decreasing average cost curve, marginal cost lies below average cost
Explanation
A natural monopoly has economies of scale over the relevant range, so its average cost falls as output increases. When average cost is decreasing, marginal cost lies below average cost.
Last updated
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,705 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
Who is called the father of Economics?
For economists, the word "utility" means:
In economics, the pleasure, happiness, or satisfaction received from a product is called ______?
When economists say that people act rationally in their self interest, they mean that individuals _______?
According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because: