question archive When a natural monopoly exists in a given industry, the per-unit costs of production will be: a
When a natural monopoly exists in a given industry, the per-unit costs of production will be: a
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When a natural monopoly exists in a given industry, the per-unit costs of production will be:
a. lowest when there are a large number of producers in the industry.
b. lower for smaller firms than for larger firms.
c. minimized at the output that maximizes the industry's profitability.
d. lowest when a single firm generates the entire output of the industry.
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Option D
The correct answer is Option D.
When a natural monopoly exists in a given industry, the per-unit costs of production will be lowest when a single firm generates the entire output of the industry. The reason behind this is economies of scale. In other words, when a firm produces a large number of goods and services, the average cost of production gets reduced.
