If the government breaks up a constant-cost, nondiscriminating monopoly into a perfectly competitive industry, what would we expect with regard to output and price?
A)Output and price will decrease.
B)Output will increase and price will decrease.
C)Output and price will increase.
D)Output will decrease and price will increase.
E)No change.

Question

Quizplus · Accepted Answer

Breaking up a constant-cost, nondiscriminating monopoly into a perfectly competitive industry will increase the number of firms competing in the industry, which will increase output as firms strive to capture a larger share of the market. This increased competition will also drive down prices as each firm will look to offer lower prices to attract customers. Therefore, we can expect output to increase and price to decrease.

If the Government Breaks Up a Constant-Cost, Nondiscriminating Monopoly into a Perfectly