Question

1. A natural monopoly occurs when

A.marginal cost is constant.

B.average cost is declining.

C.marginal cost is below average cost.

D. All of the above are true.

2. Can a monopsony exercise monopsony powerlong dash—profitably setting its price below the competitive levellong dash—if the supply curve it faces is​ horizontal? If a monopsony faces a horizontal supply​ curve, then

A.it cannot set price below the competitive level because the marginal expenditure curve will be equal to zero.

B.it may or may not be able to set price below the competitive level depending on the shape of the marginal expenditure curve.

C.it can set price below the competitive level if the demand curve is downward sloping.

D.it cannot set price below the competitive level because the marginal expenditure curve will be horizontal and equal to the supply curve.

E.it can set price below the competitive level because the marginal expenditure curve will intersect the demand curve at a wage above the competitive level.

Answer 1

1 all of the above are true .

Reason A natural monopoly Comes up with very high  fixed cost Independent of output . therefore,its marginal cost is so small that it is almost constant.

2. A

it cannot set price below competitive because marginal cost to firm is equal to marginal cost to society at a point where competitive wages are set.