If a restaurant was a natural monopoly, dividing the restaurant equally into two separate restaurants would
A)decrease marginal cost.
B)raise average total cost.
C)increase total revenue.
D)make marginal revenue less elastic.

Question

Quizplus · Accepted Answer

A natural monopoly exists when one firm can supply the entire market at a lower cost than two or more firms. Dividing the restaurant equally into two separate restaurants would result in duplication of resources and increasing average total cost as both restaurants would now have to incur overhead costs that previously were shared as a monopoly.

If a Restaurant Was a Natural Monopoly, Dividing the Restaurant