Suppose a Firm Has the Cost Structure Shown in This

question 82

Essay

Suppose a firm has the cost structure shown in this table. Explain why this industry is a natural monopoly.
$\begin{array}{|l|l|l|}\hline \text { Output Level } & \text { Fixed Cost } & \text { Variable Cost } \\\hline 0 & \$ 100 & \$ 0 \\\hline 10 & \$ 100 & \$ 10 \\\hline 20 & \$ 100 & \$ 20 \\\hline 30 & \$ 100 & \$ 50 \\\hline 40 & \$ 100 & \$ 60 \\\hline\end{array}$

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Definitions:

Risky Asset

An asset that has a significant degree of price volatility or the potential for financial loss.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points around their mean, commonly used in finance to assess the risk or volatility of an investment.

Risky Asset

An asset that has a significant degree of risk associated with it, offering the potential for higher returns in exchange for the increased risk.