Compared to a similar perfectly competitive industry,a single-price monopoly
A) creates a deadweight loss and decreases economic profit.
B) produces more output.
C) creates a deadweight loss and decreases consumer surplus.
D) is more efficient because there is no wasteful competition.
E) sets a lower price because there is less competition.

Question

Quizplus · Accepted Answer

A single-price monopoly has market power, allowing it to set a higher price than a perfectly competitive industry would in the same market. This results in a decrease in consumer surplus and a deadweight loss due to the underproduction of output. Therefore, compared to a similar perfectly competitive industry, a single-price monopoly creates a deadweight loss and decreases consumer surplus.

Compared to a Similar Perfectly Competitive Industry,a Single-Price Monopoly