If a natural monopoly was broken into several smaller competing firms,

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Natural monopolies occur when the economies of scale are so large that it is more efficient to have one firm producing the good or service rather than multiple smaller firms. If the natural monopoly was broken up into several smaller firms, the economies of scale would be destroyed, leading to higher average total costs for each firm. This would result in higher prices for consumers and ultimately a decrease in social welfare. Therefore, society would be worse off if the natural monopoly was broken up.

If a Natural Monopoly Was Broken into Several Smaller Competing