Compared to a perfectly competitive industry,________ in a monopoly.
A) both consumer surplus and social surplus are larger
B) consumer surplus is lower but social surplus is larger
C) both consumer surplus and social surplus are smaller
D) consumer surplus is higher but social surplus is smaller

Question

Quizplus · Accepted Answer

In a monopoly, the monopolist sets prices above marginal costs, leading to reduced output compared to a perfectly competitive industry. This results in a loss of consumer surplus and social surplus, as the monopolist's profit-maximizing behavior creates deadweight loss by not producing where price equals marginal cost.

Compared to a Perfectly Competitive Industry,________ in a Monopoly