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In a natural monopoly,Group of answer choicesif the government requires marginal cost pricing, it will likely have to subsidize the firm.the marginal revenue curve is horizontal.the marginal cost curve is positively sloped.society would be better off if antitrust laws were used to create many different firms in the market.

Question

In a natural monopoly,Group of answer choicesif the government requires marginal cost pricing, it will likely have to subsidize the firm.the marginal revenue curve is horizontal.the marginal cost curve is positively sloped.society would be better off if antitrust laws were used to create many different firms in the market.

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Solution

In a natural monopoly, if the government requires marginal cost pricing, it will likely have to subsidize the firm. This is because a natural monopoly has high fixed costs and low marginal costs. If the government requires the firm to price at the marginal cost, the price may be too low to cover the firm's total costs, including the high fixed costs. As a result, the government may need to provide subsidies to the firm to keep it in business.

The marginal revenue curve is not horizontal in a natural monopoly. In fact, it is downward sloping because as the firm sells more units, it has to lower the price to sell additional units, which reduces marginal revenue.

The marginal cost curve is not necessarily positively sloped. In a natural monopoly, the marginal cost of production often decreases as output increases due to economies of scale.

Society would not necessarily be better off if antitrust laws were used to create many different firms in the market. While competition can lead to lower prices and increased innovation, in a natural monopoly, one firm can produce the good or service at a lower cost than multiple firms. Therefore, breaking up a natural monopoly could lead to higher costs and prices.

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