A Natural Monopoly Is a Market Where

question 6

Multiple Choice

A natural monopoly is a market where

• A) a single firm has control over a vital natural resource.
• B) many smaller firms can produce the entire market output at the same per-unit cost as could one large firm.
• C) a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.
• D) many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

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Definitions:

Average Total Cost

the total cost of production divided by the number of units produced, representing the cost per unit.

Fixed Cost

Fixed costs are those that stay the same, unaffected by the volume of production or sales, and cover charges like rent, salaries, and insurance fees.

Total Variable Cost

The sum of all costs that vary with the level of output, such as raw materials and labor expenses, for a given period.

Average Variable Cost (AVC)

The total variable costs of production divided by the quantity of output produced, representing the variable cost per unit of output.