Asked by Julia Ellinghaus on May 05, 2024
Verified
Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?
A) Ownership of a key resource by a single firm
B) Natural monopoly
C) Government-created monopoly
D) A patent or copyright monopoly
Average Total Cost Curve
Depicts the per-unit total cost of production (fixed cost plus variable cost) divided by the quantity of output produced.
Natural Monopoly
A market condition in which a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.
- Examine the function of entry obstacles in maintaining the power of monopolies.
Verified Answer
NK
nishika khubchandaniMay 12, 2024
Final Answer :
B
Explanation :
The shape of the average total cost curve suggests that the firm experiences significant economies of scale over a wide range of output, which is characteristic of a natural monopoly. This occurs when a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.
Learning Objectives
- Examine the function of entry obstacles in maintaining the power of monopolies.