The profits that a monopoly makes are:
A)a dead-weight loss to society
B)inefficient as they hurt consumers
C)a direct transfer of economic surplus from consumers to producers
D)the amount by which total surplus is lower as a result of monopoly

Question

Quizplus · Accepted Answer

Monopolies are able to charge higher prices and earn higher profits because they have no competition. This results in a direct transfer of economic surplus from consumers to producers, as consumers are willing to pay a higher price for the product due to lack of alternative options. This is not necessarily inefficient, as the monopolist is still producing at a level where marginal cost equals marginal revenue, but it does result in a decrease in total surplus for society. Therefore, option C is the best choice.

The Profits That a Monopoly Makes Are