The figure to the right illustrates market demand for a monopoly along with its

Question

The figure to the right illustrates market demand for a monopoly along with its average total cost (ATC) curve Is the monopoly a natural monopoly? The firm 0 A, is not a natural monopoly because it experiences diseconomies of scale 10 9.0 8.00 O 6.0 B. is a natural monopoly because it can supply the entire market at lower ° C. Co. average total cost than can two or more firms is a natural monopoly because it has the potential to earn economic profits 5.00 8 4.00 3.00 is a natural monopoly because its demand curve is downward sloping E. is not a natural monopoly because its demand curve is not infinitely elastic Suppose 14 units of output are supplied in the market. How much lower is the average total cost of production for one firm compared to two firms? 0.0 One firm can supply 14 units of output for $ two firms. (Enter your response as an integer.) 0 2 4 6 8 10 12 14 16 18 20 22 24 Quantity less per unit in average total cost than

Explanation / Answer

Answer

Option B

the firm has downward sloping average total cost curve which supplies more output at the lower cost than two or more firms.

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One firm can supply 14 units at ATC=$3 and if 2 firms are there then one firm will supply seven and other seven

ATC=$7

The difference is 7-3=$4

One firm can supply 14 units for $4 less per unit ATC than two firms

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