Question

A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.

Answer 1

Answer:

Natural monopoly

Explanation:

A natural monopoly refers to a type of monopoly that occurs when the start-up costs or infrastructural costs are high or economies of scale in an industry are very powerful in such a way that only the largest supplier in the industry which is usually the first supplier in the market has a great advantage over potential competitors and therefore becomes the only supplier in the industry.

On the long-run average cost (LRAC) curve, a natural monopoly exists when the quantity demanded is less than the minimum quantity that is required to be at the bottom of the LRAC curve.

Therefore, a natural monopoly exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.