A Natural Monopoly Exists When

question 32

Multiple Choice

A natural monopoly exists when

• A)economies of scale are negligible
• B)there are a few dominant firms that corner the market
• C)one firm can produce the market output at lower average cost than two or more firms can
• D)barriers to entry are low
• E)only a few firms can minimize cost and maximize profit

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Definitions:

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period.

Variable Production Costs

Costs that vary in proportion to the level of production or business activity.

Variable Costing

An accounting method that only takes into account the variable production costs (direct materials, direct labor, and variable manufacturing overhead) when calculating product cost.

Period Cost

Expenses that are not directly tied to production and are expensed in the period they are incurred, such as selling, general, and administrative expenses.