Question 16 A natural monopoly exists when 2 a monopolist produces a product, the main component of which is a natural wood. economies of scale are so large that only one firm can survive and achieve low average total cost in long run. a firm is the exclusive owner of a key resource necessary to produce the firm's product.

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Anu Bhardwaj · Accepted Answer

Question 16: A natural monopoly exists when...
A natural monopoly exists when economies of scale are so large that only one firm can survive and achieve low average total cost in the long run.

This situation typically arises in industries with high fixed costs, such as public utilities like water, electricity, or natural gas. The initial cost of building the infrastructure (pipes, power lines, etc.) is so high that it is inefficient for multiple companies to replicate it. A single firm can serve the entire market at a lower average cost than two or more firms could.

Question 17: Productive efficiency occurs when price...
Productive efficiency occurs when a firm produces a good or service at the lowest possible average total cost.

While the question options relate productive efficiency to price, the most accurate economic definition is about minimizing production costs. In a perfectly competitive market, this happens at the point where the firm's price is equal to its minimum average total cost. Therefore, out of the given options, the best answer is that productive efficiency occurs when price is equal to average total cost at its minimum.

Chemistry

Chemistry

Anu Bhardwaj

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