Question

Which of the following statements are true about this natural monopoly? Check all that apply. The cable company is experiencing economies of scale. The cable company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The cable company must own a scarce resource. True or False: Without government regulation, natural monopolies can earn positive profit in the short run. True False

Answer 1

Answers:

1) The correct answer is letter "C": It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.

2) The statement is: False.

Explanation:

1) Natural monopolies appear when only one company provides a good or service without the intention of taking over the market. Although governments allow their existence, they regulate them to protect consumers. Typically, natural monopolies are convenient because they offer their products at a lower rate than when the market is full of competitors.

2) If governments do not regulate natural monopolies they could charge for their product whatever they want. This will create uncertainty in the market because consumers whether will continue purchasing those goods or services at higher rates or look for substitutes. It is unlikely that in the short run natural monopolies' revenues would be positive under this scenario.

Answer 2

Answer:

The answers are It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. And It is true that without government regulation, natural monopolies can earn positive profit in the short run.

Explanation:

It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.

Without government regulation, natural monopolies can earn positive profit in the short run.  It is a true statement.