Question

it is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. in order for a monopoly to exist in this case, the government must have intervened and created it. the water company is experiencing diseconomies of scale. the water company is experiencing economies of scale. true or false: without government regulation, natural monopolies never earn zero profit in the long run. true false

Answer 1

Both the statements are True as the water company is experiencing economies of scale and without government regulation, natural monopolies never earn zero profit in the long run.

What is Economy of Scale?

Businesses benefit from economies of scale, which are cost advantages, as a result of efficient production. Businesses must grow production while lowering costs to achieve economies of scale. This happens because costs are divided among a wider range of commodities. In microeconomics, the cost advantages that businesses have as a result of their size of operation are referred to as economies of scale. They are frequently measured by the amount of production produced in a specific period of time. When the cost of producing a unit of output declines, scale can be increased. Bulk purchases allow a major retail establishment to reduce their cost per unit. It can then decide whether to keep the savings to boost its earnings or to pass them along to customers as a competitive advantage.

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