If an upstream monopoly and a downstream monopoly vertically integrate into a profit-maximizing monopoly,then the total amount of deadweight loss in the industry
A) will increase.
B) will decrease.
C) will remain unchanged.
D) cannot be determined.

Question

Quizplus · Accepted Answer

When an upstream monopoly and a downstream monopoly vertically integrate, they can coordinate their pricing and production strategies more efficiently, eliminating the double marginalization problem (where each monopolist adds their own markup). This typically leads to lower prices and higher output compared to when they operate separately, thus reducing the total amount of deadweight loss in the industry.

If an Upstream Monopoly and a Downstream Monopoly Vertically Integrate