Question

What can you say about the ATC curve of a natural monopoly? a. It is constant....

What can you say about the ATC curve of a natural monopoly?

a.

It is constant.
b.

It is increasing.
c.

It is U-shaped.
d.

It is decreasing.
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Answer #2

Option D is correct - It is decreasing

Natural monopoly is a type of monopoly where there is large scale of supply of a particular goods by one firm as the infrastructure needed for its production is quite costly and requires large fixed cost. Examples of natural monopoly are, gap pipelines, water supply etc.

Natural monopolies enjoy economies of scale (since their production is at a large scale they benefit from that) and thus their average total cost keeps falling as the number of units supplied increases.

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