Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

12. Monopoly

Characteristics of Monopoly

Microeconomics

12. Monopoly

Characteristics of Monopoly

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Multiple Choice

A distinct characteristic of a natural monopoly is that

Legal barriers to entry form its existence

It has no close substitutes

Its average total cost curve slopes downward as it intersects the demand curve

It faces a downward-sloping demand curve

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Verified step by step guidance

Understand the concept of a natural monopoly: A natural monopoly occurs when a single firm can supply the entire market at a lower cost than any combination of two or more firms. This typically happens due to economies of scale.

Identify the key feature of a natural monopoly: The average total cost (ATC) curve slopes downward over the range of market demand. This means that as the firm produces more, the average cost per unit decreases.

Recognize the implication of the ATC curve intersecting the demand curve: When the ATC curve intersects the demand curve while still sloping downward, it indicates that the firm can meet the entire market demand at a lower cost than any potential competitors.

Differentiate from other characteristics: While legal barriers and lack of substitutes can be features of monopolies, the defining characteristic of a natural monopoly is the downward-sloping ATC curve intersecting the demand curve.

Consider the market dynamics: A natural monopoly is often regulated by the government to prevent the firm from exploiting its position, as it can set prices above competitive levels due to lack of competition.