Relative to a perfectly competitive market, a monopoly results in
A)a gain in producer surplus equal to the gain in consumer surplus.
B)a gain in producer surplus equal to the loss in consumer surplus.
C)a gain in producer surplus less than the loss in consumer surplus.
D)greater economic efficiency.

Question

Quizplus · Accepted Answer

A monopoly results in a gain in producer surplus but also leads to a loss in consumer surplus. The gain in producer surplus is because a monopoly has the power to raise prices and restrict output, leading to higher profits for the producer. However, the loss in consumer surplus is due to the fact that the monopoly charges a higher price and produces less output, reducing the surplus consumers receive from the product. Therefore, the gain in producer surplus is less than the loss in consumer surplus, resulting in an overall reduction in economic efficiency compared to a perfectly competitive market.

Relative to a Perfectly Competitive Market, a Monopoly Results in