Must be used to subsidize the production of the good. This eliminatesДeadweight loss but revenues no longer cover costs. The marginal cost curve crosses the demand curve. Surplus from the monopoly to consumers, expands output, increases social The average cost curve crosses the demand curve. A natural monopoly occurs when a firm enjoys extensive economies of scale in its production process. A natural monopolist can produce the entire output for the market at a cost lower than what it would be if there were multiple firms operating in the market. Require the monopoly to set its price where A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. A natural monopoly is a market where a single seller can provide the output because of its size. Policies the government could follow in regards to a natural monopoly.ДЄllow the monopoly to maximize profits by Monopoly, can provide a given amount of output at a lower average cost than Therefore, average costs continue to fall over the relevant range of output. Thus, average costsД®xceed marginal costs over a wide range of output.Д¬osts over the 'relevant range of output' (i.e., the range between theДЇirst unit of output and the amount consumers would demand at a zero price). Small amounts of output and fall as output increases.

Therefore, average costs are very large at

Natural monopoly