If government regulators broke up a natural monopoly into several competing firms, average costs of production would decrease.

Question

Quizplus · Accepted Answer

Breaking up a natural monopoly, which typically enjoys economies of scale, into several smaller firms would likely increase the average costs of production because these smaller firms would not be able to achieve the same efficiencies and economies of scale as the original monopoly.

If Government Regulators Broke Up a Natural Monopoly into Several