In a monopoly, consumer surplus is _____, and producer surplus is:
A) reduced; reduced.
B) reduced; increased.
C) increased; reduced.
D) increased; increased.

Question

Quizplus · Accepted Answer

In a monopoly, consumer surplus is reduced because the monopolist can set prices higher than in a competitive market, reducing the quantity consumed and the difference between what consumers are willing to pay and what they actually pay. Producer surplus is increased because the monopolist can capture more of the market surplus by setting higher prices.

In a Monopoly, Consumer Surplus Is _____, and Producer Surplus