A Natural Monopoly Exists When

question 77

Multiple Choice

A natural monopoly exists when

• A)a monopolist produces a product, the main component of which is a natural resource.
• B)economies of scale are so large that only one firm can survive and achieve low unit costs.
• C)a firm is the exclusive owner of a key resource necessary to produce the firm's product.
• D)there are no close substitutes for a firm's product.

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Definitions:

Income Decrease

A reduction in the amount of money received by an individual or entity, affecting purchasing power and savings.

Budget Constraint

The limits imposed on household choices by income, wealth, and product prices.

Relative Price

The price of a good or service in comparison to the price of other goods and services.

Indifference Curves

Graphical representations of different bundles of goods among which a consumer is indifferent, showing levels of utility that are equivalent to the consumer.