For a natural monopoly firm, the resource-allocative efficient output is 200 units. The highest per-unit price that can be charged for this output is $3. Average total cost at 200 units is $3.50. For the natural monopoly firm that produces and sells 200 units of output, a. marginal cost is below its average total cost. b. fixed costs must be zero. c. it takes losses of $1.50 per unit. d. variable costs must be zero.

Question

Merle

Business

5 August, 14:41

For a natural monopoly firm, the resource-allocative efficient output is 200 units. The highest per-unit price that can be charged for this output is $3. Average total cost at 200 units is $3.50. For the natural monopoly firm that produces and sells 200 units of output, a. marginal cost is below its average total cost. b. fixed costs must be zero. c. it takes losses of $1.50 per unit. d. variable costs must be zero.

+4

Answers (1)

Know the Answer?

Valinto · Answer 1

Option (A) is the correct answer to this question.

Explanation:

As mentioned in the question.

Q = 200 units

The resource-allocative effective output is when P = MC is used.

P=$3

ATC = $3.50

For just a natural monopoly company that produces and sells 200 amount of production, the unit benefit is less than its average total cost due to ATC > P = MC when ATC is above MC.

Other options are incorrect because they are not related to the given scenario.