Which of the following qualify as a social cost of monopoly power?
(i) loss of consumer surplus
(ii) loss of producer surplus
(iii) excessive profit earned by the owner of a monopoly
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

The loss of consumer and producer surplus are both social costs of monopoly power. The excessive profit earned by the owner of a monopoly is not necessarily a social cost, as it depends on how the profits are used (for example, if they are reinvested in research and development, they could ultimately benefit society).

Which of the Following Qualify as a Social Cost of Monopoly