What Is a Key Criterion Involved in Deciding a Natural

question 230

Multiple Choice

What is a key criterion involved in deciding a natural monopoly?

• A)Size of the firm relative to its competitors
• B)Size of the firm relative to the total market demand for a product
• C)Magnitude of profits generated by the company
• D)A firm's ability to adapt to market changes

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Definitions:

Fixed Costs

Costs that do not change with the level of output produced, such as rent, salaries, and loan payments.

Long Run

A period of time sufficiently long that all inputs or factors of production can be varied by firms, allowing them to fully adjust to market conditions.

Variable Costs

Expenses that vary directly with the amount of production or business activity.

Fixed Costs

Costs that do not change with the level of output or production, such as rent or salaries.