When Significant Economies of Scale Are Present in the Production

question 165

Multiple Choice

When significant economies of scale are present in the production process, an industry will tend naturally toward monopoly because

• A) one firm will be able to produce the entire market output at a lower cost than several smaller firms.
• B) marginal revenue will be less than market price, giving firms the incentive to equate marginal cost with price instead of equating marginal cost and marginal revenue.
• C) economies of scale can only be present when firms produce identical products and there is no reason to have more than one firm producing the same exact product.
• D) consumers will be unwilling to compare the prices charged by several different firms.

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