When an Industry Is a Natural Monopoly

question 280

Multiple Choice

When an industry is a natural monopoly,

• A)it is characterized by constant returns to scale.
• B)it is characterized by diseconomies of scale.
• C)a larger number of firms may lead to a lower average cost.
• D)a larger number of firms will lead to a higher average cost.

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Definitions:

Supplies Expense

Costs associated with the consumable items used in the daily operations of a business, which may include office or manufacturing supplies.

Buildings

Assets classified in accounting, representing structures owned by a business for purposes such as offices, manufacturing, or storage.

Prepaid Insurance

Insurance premiums paid in advance by a company, which are recorded as an asset on the balance sheet until the coverage period lapses.

Asset Accounts

Accounts that represent resources owned or controlled by a company that have future economic value.