A Natural Monopoly Exists When

question 11

Multiple Choice

A natural monopoly exists when

• A) only natural resources are used for production.
• B) only man-made resources are used for production.
• C) economies of scale are so great that the largest firm in the industry has the lowest costs and is able to drive out competitors.
• D) a part of an industry in the private sector is not regulated by the government.

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Definitions:

Total Surplus

The total net gains for society represented by the combined amount of consumer surplus and producer surplus in a market.

Producer Surplus

This is an economic measure of the difference between the amount producers are willing to supply a good for and the amount they actually receive.

Consumer Surplus

The difference between the maximum price consumers are willing to pay for a product and the actual market price they pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive due to market price.