What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?
A) Both producer and consumer surplus increase.
B) Producer surplus falls but consumer surplus rises.
C) Both producer and consumer surplus decrease.
D) Producer surplus rises but consumer surplus falls.
E) Both producer and consumer surplus remain unchanged.

Question

Quizplus · Accepted Answer

When a monopolist increases output above the profit-maximizing level, the price typically falls, leading to a decrease in producer surplus due to lower profits, while consumer surplus increases as consumers benefit from lower prices.

What Happens to Producer and Consumer Surplus When a Monopolist