Figure 10-9 Figure 10-9 Shows the Cost and Demand

question 142

Multiple Choice

Figure 10-9 Figure 10-9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-9.Erickson Power is a natural monopoly because

• A)it is a power company and all power companies are natural monopolies.
• B)average total cost is still declining when it intersects demand.
• C)of its continually declining marginal revenue curve as output rises.
• D)its marginal cost lies entirely below its long-run average cost.

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Definitions:

Price-Taker Firms

Companies that accept the market price as given and have no influence to change the price of the goods or services they sell.

Expand

Refers to the process of growth or increase in size, volume, number, or scope.

Contract

A legally binding agreement between two or more parties that outlines obligations, rights, and conditions under which a transaction or exchange will occur.

Market Entry

The act of bringing a new product or service to market, including the challenges and strategies involved in successfully engaging with a new or existing market.