A Natural Monopoly

question 4

Multiple Choice

A natural monopoly:

• A) has an average total cost curve that reaches minimum at a low level of output.
• B) is usually subject to antitrust suits.
• C) is usually allowed to choose its price so as to maximize profits in the United States.
• D) occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market.

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Definitions:

Corporate Entity

A legal entity that is separate and distinct from its owners, which can own assets, incur liabilities, and conduct business.

Debt Securities

Financial instruments representing money borrowed that must be repaid, with terms that define the amount, interest rate, and maturity date.

Bonds

Fixed income investments in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a variable or fixed interest rate.

Convertible Bond

A type of bond that can be converted into a predetermined number of shares of the issuing company's stock.