If a Natural Monopoly Was Forced to Break Up into Several

question 2

Multiple Choice

If a natural monopoly was forced to break up into several small competitive firms,the

• A)Cost of production should fall as the smaller firms become more efficient.
• B)Price charged by the competitive firms should decrease as the firms become more efficient.
• C)Price charged by the competitive firms should increase because they no longer have economies of scale.
• D)Total production for the industry should increase because of the efficiency generated by increased competition.

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Definitions:

Allowance Method

An accounting technique used to estimate and record bad debts expense by anticipating uncollectible accounts.

Note Receivable

A financial asset representing a written promise to receive a specific amount of money at a future date.

Dishonored Note

A promissory note that has not been paid by the maker at the time of maturity, resulting in default.

Promissory Note

A financial document in which one party promises in writing to pay a determinate sum of money to another, either at a fixed or determinable future time or on demand.