Assume someone organises all farms in the nation into a monopoly. Which of the following occurs? i. Consumer surplus decreases.
Ii) Economic profit increases.
Iii) A deadweight loss is created.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii and iii

Question

Quizplus · Accepted Answer

When a monopoly is formed, consumer surplus decreases because the monopolist can set higher prices than in a competitive market. Economic profit increases for the monopolist because they can set prices above marginal costs. A deadweight loss is created because the higher monopoly price reduces the quantity sold below the socially optimal level, leading to inefficiencies in the market.

Assume Someone Organises All Farms in the Nation into a Monopoly