ECONOMICS
COMPETITION AND MARKET STRUCTURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
25-75 firms selling slightly differentiated products; some price control; low barriers to entry
|
|
|
a market that runs most efficiently when one large firm supplies all of the output; when competition would create chaos
|
|
|
a formal organization of producers that agree to coordinate prices and production
|
|
|
2-24 firms control the market; products can be slightly differentiated; high barriers to entry; lots of control over price
|
Detailed explanation-1: -A natural monopoly is a type of monopoly that arises due to unique circumstances where high start-up costs and significant economies of scale lead to only one firm being able to efficiently provide the service in a certain territory.
Detailed explanation-2: -A natural monopoly will maximize profits by producing at the quantity where marginal revenue (MR) equals marginal costs (MC) and by then looking to the market demand curve to see what price to charge for this quantity.
Detailed explanation-3: -An industry that enjoys economies of scale can easily become a natural monopoly. 2. Natural Monopolies. A natural monopoly is a market that runs most efficiently when one large firm provides all of the output.
Detailed explanation-4: -A natural monopoly is an occurrence of monopoly due to high fixed and start-up cost or use of some technological different which keeps the other firms out of the market. So the firm that provides electricity to all homes has a natural monopoly.