Which of the following will occur if a natural monopoly is broken into two smaller firms?
A)The price will drop.
B)Industry output will increase.
C)Production costs will increase.
D)Industry output will decrease.

Question

Quizplus · Accepted Answer

When a natural monopoly is broken into smaller firms, production costs increase because the natural monopoly's efficiency comes from economies of scale, which are lost when the monopoly is divided.

Which of the Following Will Occur If a Natural Monopoly