Splitting up a the natural monopoly held by a public utility that produces and provides electricity would
A) raise the total cost of production for all and force their profits to zero.
B) raise the average cost of production and force consumers to pay more.
C) evolve the structure of costs and demand to make competition less costly.
D) evolve the structure of costs and demand to make competition more likely.

Question

Quizplus · Accepted Answer

Natural monopolies, like public utilities that provide electricity, benefit from economies of scale, meaning the average cost of production decreases as the scale of production increases. Splitting up such a monopoly would lead to smaller entities with higher average costs, which would likely be passed on to consumers in the form of higher prices.

Splitting Up a the Natural Monopoly Held by a Public