When an Industry Is a Natural Monopoly

question 280

Multiple Choice

When an industry is a natural monopoly,

• A)it is characterized by constant returns to scale.
• B)it is characterized by diseconomies of scale.
• C)a larger number of firms may lead to a lower average cost.
• D)a larger number of firms will lead to a higher average cost.

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Definitions:

Zero-Coupon Bonds

Bonds that are issued at a discount to their face value and do not pay periodic interest, but rather pay the face value at maturity.

Yield

The income return on an investment, such as the interest or dividends received, typically expressed as an annual percentage rate based on the investment's cost, its current market value, or its face value.

Face Value

The nominal or dollar value stated on a security or financial instrument, such as a bond or stock.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing.