What is the relationship between economies of scale and a natural monopoly?
What will be an ideal response?
In those extreme cases where there are extensive economies of scale across the full range of potential output for market demand, it may be most economical for only one firm to supply the entire market. Large expenses associated with plant facilities may be difficult to secure. Existing consumer loyalty can also create economies of scale issues. In this case one firm, rather than two or more firms, would have declining average costs across the entire range of market demand and be the lowest cost producer. The single firm would be characterized as a natural monopoly.
You might also like to view...
Using equal amounts resources, country a can produce either 30 tons of mangoes or 10 tons of bananas, and country b can produce either 10 tons of mangoes/bananas. Which of the following is consisted w/ the info above
With a progressive income tax, as taxable income rises (up to a certain point), one's tax rate rises
Indicate whether the statement is true or false
Funds lent to start-up firms in return for shares of the profit if the firms succeed are called:
A. retained earnings. B. time deposits. C. venture capital. D. transfer payments.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, measured in terms of hybrid cars
A. remains constant. B. decreases. C. initially increases, then decreases. D. increases.