A&P II Lymphatic System Practice Exam

Which of the following is a key characteristic of a natural monopoly?

It experiences constant returns to scale Its long-run average cost falls over the entire range of market demand It faces a perfectly elastic demand curve It produces where marginal cost equals average revenue

Correct Answer:

Its long-run average cost falls over the entire range of market demand

Explanation:

A natural monopoly occurs when continuous economies of scale exist up to the point of market demand, making it most efficient for a single firm to supply the entire market.

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