Which of the Following Will Occur If a Natural Monopoly

question 187

Multiple Choice

Which of the following will occur if a natural monopoly is broken into two smaller firms?

• A)The price will drop.
• B)Industry output will increase.
• C)Production costs will increase.
• D)Industry output will decrease.

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Definitions:

Variable Costs

Costs that vary directly with the volume of production or service delivery, such as materials and labor.

Fixed Costs

Expenses that do not change in total irrespective of the volume of goods or services produced by a company.

Break Even

The point at which total revenues equal total expenses, with no net loss or profit.

Variable Costs

Expenses that are directly tied to the rate of goods produced or services sold, such as the cost of materials and labor involved.