'When a Single Firm Can Supply the Entire Market at a Lower

question 159

Multiple Choice

'When a single firm can supply the entire market at a lower cost than two or more firms, the firm can be said to have which of the following characteristics?

• A) It must be producing at the socially optimal level of output.
• B) It is a natural monopoly.
• C) The marginal cost curve rises at an increasing rate.
• D) It is one of two firms in the industry.

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Definitions:

Opportunity Costs

The penalty of bypassing the next most advantageous option when a decision is made.

Small Business

A privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a medium or large company.

Risk-Free

Refers to an investment that is considered to have no risk of financial loss.

Perfectly Competitive Market

A market structure characterized by a large number of small firms, homogeneity of products, free entry and exit, and perfect information, leading to firms being price takers.