ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If regulators force a monopoly to price at this point, where price equals marginal cost, they would force the monopoly to incur a loss or negative economic profits, which would eventually force the monopoly out of business.

Detailed explanation-2: -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.

Detailed explanation-3: -A natural monopoly will typically have high fixed costs and low marginal costs meaning that it might be inefficient to have many firms each providing the same product. Long run average cost continues to fall over a big range of output.

Detailed explanation-4: -Natural monopolies cannot earn zero profit without government regulation. This statement is true. Monopolies maximize profit and with no government regulation, they earn a profit in the long run. When the government intervenes to regulate the market, only then there is the possibility of them earning a zero profit.