The equilibrium price and quantity in a monopoly market:
A) is efficient.
B) is the same as a perfectly competitive market.
C) causes a loss of total surplus.
D) causes no welfare costs.

Question

Quizplus · Accepted Answer

In a monopoly market, the equilibrium price and quantity are set at a point where marginal revenue equals marginal cost, which is lower than the price and higher than the quantity that would occur in a perfectly competitive market. This leads to a loss of total surplus, as the monopolist restricts output and charges a higher price, resulting in deadweight loss and consumer surplus reduction. Therefore, the best choice is C.

The Equilibrium Price and Quantity in a Monopoly Market