Question

If the long-run average total cost curve of an industry is declining at the point where it intersects the industry demand curve, we can expect: eco 202

Answer 1

If the long-run average total cost curve of an industry is declining at the point where it intersects the industry demand curve, then we can expect that the industry will be a natural monopoly.

What is Natural monopoly?

This is characterized by high infrastructural costs and other barriers which prevent entry into the market. This gives rise to a very few being involved and usually offers no competition as there is a single seller with unique types of goods and services.

This type of monopoly involves sellers having a big size and able to produce the required output for the consumers. This makes them to be self-sufficient and is characterized by the long-run average total cost curve of an industry declining and intersecting the industry demand curve which is the reason why it was chosen as the most appropriate choice.

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