Additional Firms Often Do Not Try to Compete with a Natural

question 601

Multiple Choice

Additional firms often do not try to compete with a natural monopoly because

• A)they fear retaliation in the form of pricing wars from the natural monopolist.
• B)they are unsure of the size of the market in general.
• C)they know they cannot achieve the same low costs that the natural monopolist enjoys.
• D)the natural monopoly does not make a large profit.

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Definitions:

Simple Interest

Simple interest is a method of calculating the interest charge on a loan or investment based on the original principal amount and not on accumulated interest.

Contract

A legally binding agreement between two or more parties that outlines terms and conditions.

Required Rate

The minimum return or interest rate a lender demands or an investor expects to receive from an investment.

Simple Interest

Interest calculated only on the initial amount of a loan or principal, not on the interest previously earned.