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When a firm has natural monopoly

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Reference no: EM131380399

1. In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

a. New firms will likely enter this market to capture any remaining economic profits.

b. In the short run firms will continue to operate, but in the long run firms will leave the market.

c. In the short run firms will shut down, and in the long run firms will leave the market.

d. The firm will earn zero profits in both the short run and long run.

2. When a firm has a natural monopoly, the firm's

a. marginal cost curve must lie above the firm’s average total cost curve.

b. marginal cost always exceeds its average total cost.

c. average total cost curve is downward sloping.

d. total cost curve is horizontal.

Reference no: EM131380399

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