A Natural Monopoly

question 86

Multiple Choice

A natural monopoly

• A) exists when many sellers experience lower average total costs than potential competitors do.
• B) exists when a firm has sole ownership of a natural resource.
• C) is an example of a government-created barrier.
• D) is needed to make a profit in the long run.
• E) exists when a single seller experiences lower average total costs than any potential competitor.

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Definitions:

Encumbered Assets

Assets that are used as security or collateral for a loan or debt, restricting their free use or disposal by the owner.

Secured Borrowing

A type of loan in which the borrower pledges an asset as collateral for the loan, which the lender can claim if the loan defaults.

Financial Statements

Formal records that outline the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Sale and Leaseback Arrangement

A financial transaction where one sells an asset and leases it back for the long-term; thereby retaining its use while freeing up the cash invested in the asset.