If a Natural Monopoly Was Broken into Several Smaller Competing

question 45

Multiple Choice

If a natural monopoly was broken into several smaller competing firms,

• A)Consumers would lose because of less competition.
• B)Producers would be better off because they would have greater market share.
• C)Society would be worse off because the economies of scale would be destroyed.
• D)Workers would be worse off because fewer jobs would be available.

---

Definitions:

MP L

Marginal Product of Labor; the additional output resulting from employing one more unit of labor, holding other inputs constant.

MP C

Marginal Propensity to Consume, which is the fraction of additional income that a household spends on consumption.

Production Costs

Expenses associated with the creation of a product or service, including raw materials, labor, and overhead costs.

Substitution Effect

Reflects changes in consumption patterns due to changes in relative prices of goods, where consumers replace more expensive items with less expensive alternatives.