Suppose a single firm can produce 100 units at an average cost of $15. If two firms produce 50 units each, the total cost rises to $2,500. Which of the following is true about this market?
A. The demand for this product will be higher if there are two firms producing the product than if there is only one.
B. It is more efficient to have two firms so they each have a competitor.
C. Neither firm can make a profit.
D. It is a natural monopoly.
Answer: D
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The holding period return has relevance because:
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