A Natural Monopoly Is Characterised by Large Fixed Costs Relative

question 142

True/False

A natural monopoly is characterised by large fixed costs relative to variable costs.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits that could have been received but were given up.

Explicit Cost

Direct, out-of-pocket payments for resources employed in the production of goods or services.

Marginal Cost

The additional cost incurred by producing and selling one more unit.

Fixed-Cost Fallacy

Consideration of costs that do not vary with the consequences of your decision (also known as the sunk-cost fallacy).