Ch09-07 S8 (19-23c)2:05 Natural MonopoliesBUS Ch9 v2 07 newNatural Monopolies19. Natural monopolies occur as the result of the type of good they produce. Naturalmonopalies tend to produce goods that are highly capital intensive and have a verYhigh fixed cost.20. Other factors leading to a natural monopoly include a scarce resource controlledsolely by the firm, or the firm serves a market that is limited to specific geographicalarea.21. Thus, the industries that tend toward a natural monopoly market structure requiresfirms to engage in larpe scale production to reach min mum ong Run average tota.cost.22. Examples: Water and power companies, mining companies, and railroads23. This brings us back to chapter 7 and our discussion of economies of scale.a) Increasing economies oi scale indicates that as scale of plant Increases, AC declines,b) Constant economies of scale indicates that as scale of plant increases, AC is constant.c) Decreasing economies of scale indicates that as scale of plant increases, AC2:09/2:15* YouTube63. Markets that are best served by a natural monopoly are markets were the cost structure of production is dominated bySelect one:O a. low variable costO b. high average variable costO c. low fixed costO d. high fixed costCheckage

A monopoly is a sole producer in the market thus having maximum market power and acting as a price maker.

BUS Ch9 v2 07 new. Natural Monopolies 19. Natural monopolies occur as the result of the type of good they produce. Natural monopolies tend to produce goods that are highly capital intensive and have a very high fixed cost. 20. Other factors leading to a natural monopoly include a scarce resource controlled solely by the firm, or the firm serves a market that is limited to specific geographical area. 21. Thus, the industries that tend toward a natural monopoly market structure requires firms to engage in large scale production to reach minimum long Run average total cost. 22. Examples: Water and power companies, mining companies, and railroads. 23. This brings us back to chapter 7 and our discussion economies of scale. a) Increasing economies of scale indicates that as scale of plant Increases, AC declines. b) Constant economies of scale indicates that as scale of plant increases, AC is constant. c) Decreasing economies of scale indicates that as scale of plant increases. Ad 2:09 / 2:15 YouTube arkets that are best served by a natural monopoly are markets were the cost structure of production is dominated by I one: low variable cost high average variable cost low fixed cost 1. high fixed cost eck

BUS Ch9 v2 07 new. Natural Monopolies 19. Natural monopolies occur as the result of the type of good they produce. Natural monopolies tend to produce goods that are highly capital intensive and have a very high fixed cost. 20. Other factors leading to a natural monopoly include a scarce resource controlled solely by the firm, or the firm serves a market that is limited to specific geographical area. 21. Thus, the industries that tend toward a natural monopoly market structure requires firms to engage in large scale production to reach minimum long Run average total cost. 22. Examples: Water and power companies, mining companies, and railroads. 23. This brings us back to chapter 7 and our discussion economies of scale. a) Increasing economies of scale indicates that as scale of plant Increases, AC declines. b) Constant economies of scale indicates that as scale of plant increases, AC is constant. c) Decreasing economies of scale indicates that as scale of plant increases. Ad 2:09 / 2:15 YouTube arkets that are best served by a natural monopoly are markets were the cost structure of production is dominated by I one: low variable cost high average variable cost low fixed cost 1. high fixed cost eck

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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