Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs?
i.Consumer surplus decreases.
ii.Economic profit increases.
iii.A deadweight loss is created.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii

Question

Quizplus · Accepted Answer

When a monopoly is formed, consumer surplus decreases because the monopolist can increase prices above competitive levels. Economic profit increases because the monopolist can exercise market power to maximize profits. A deadweight loss is created because the higher monopoly price reduces the quantity sold below the socially optimal level, leading to inefficiency in the market.

Assume Someone Organizes All Farms in the Nation into a Monopoly.Which