A Natural Monopoly

question 146

Multiple Choice

A natural monopoly

• A) is not protected by any barrier to entry.
• B) exists because of legal barriers to entry.
• C) is an industry where two or more smaller firms can supply the market at a lower cost than one big firm could.
• D) is an industry in which economies of scale exist at the level of output where the market demand curve intersects the long- run average cost curve.

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Definitions:

Contributed Surplus

An account on a company's balance sheet representing the excess amount investors pay over the par value of the company's shares.

Preferred Shares

A class of ownership in a corporation that has a higher claim on assets and earnings than common shares, often with fixed dividends.

Common Shares

Equity securities that represent ownership in a company, entitling holders to vote at shareholder meetings and to receive a share of the company's profits through dividends.

Book Values

The value of an asset or liability according to its balance sheet account balance, taking into account the cost of the asset minus depreciation.