A2 – Natural Monopoly – Multiple-Choice questions

Just been covering this with my A2 class and as it is a popular topic in the multiple choice paper (P3). Here are some thoughts on the types of questions they could ask on natural monopoly graphs. Remember that the natural monopoly achieves economies of scale at all levels of output therefore the MC curve cuts the AC curve above the AR curve. The following are areas/points on the natural monopoly graph that you should know about. Loss of allocative efficiency is a popular question.

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