The diagram depicts a natural monopoly, which is a particular kind of monopoly. Natural monopolies exist when the market can only sustain one firm. Having more than one firm would lead to a wasteful duplication of resources, as these industries have very high start-up costs, with continuously falling average costs in the long run as quantity increases, due to economies of scale.
Choices A, B, and D are incorrect as those market structures all have average costs curves that eventually increase in the long run due to diseconomies of scale and in the short run due to diminishing marginal returns.
