A Natural Monopoly Exists When

question 179

Multiple Choice

A natural monopoly exists when

• A) diseconomies of scale exist in an industry.
• B) one firm can supply an entire market at a lower average total cost than can two or more firms.
• C) a firm can engage in price discrimination.
• D) the producers in an industry have formed a cartel.
• E) a monopoly firm faces a horizontal demand curve.

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Definitions:

Federal Funds

Reserve balances that commercial banks hold at Federal Reserve Banks, often referred to in the context of the federal funds rate, which is the interest rate at which banks lend to each other overnight.

Income Tax

Tax levied by a government directly on income, including wages, salaries, and investments.

Constitution

The fundamental principles and established precedents according to which a state or other organization is governed.

Police Power

The power retained by each state to pass laws that protect the health, safety, and welfare of its citizens.