If a perfectly competitive industry becomes a monopoly and the costs do not change, which of the following allocation of costs and benefits applies?
A) The producer and society are harmed, but consumers benefit.
B) The producer is harmed, but consumers and society benefit.
C) The producer and society benefit, but consumers are harmed.
D) The producer, consumers and society all benefit.
E) The producer benefits, but consumers and society are harmed.

Question

Quizplus · Accepted Answer

When a perfectly competitive industry becomes a monopoly, the producer can benefit from increased market power, allowing for higher prices and potentially greater profits. However, consumers face higher prices and fewer choices, leading to consumer harm. Society as a whole is harmed due to the loss of consumer surplus and a decrease in overall economic efficiency, as monopolies can lead to underproduction compared to a competitive market, creating a deadweight loss.

If a Perfectly Competitive Industry Becomes a Monopoly and the Costs