Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market.We would expect price to _____,output to _____,consumer surplus to _____,producer surplus to _____,and deadweight loss to _____.
A)rise;fall;rise;rise;fall
B)rise;fall;fall;fall;rise
C)rise;fall;fall;rise;rise
D)fall;rise;rise;fall;fall

Question

Quizplus · Accepted Answer

When a perfectly competitive market is transformed into a monopoly market, we would expect price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to also rise. This is because a monopoly market has the power to set higher prices since consumers have no alternative options, resulting in a decrease in output. The decrease in output causes a loss in consumer surplus while increasing producer surplus. Deadweight loss also increases due to the reduced output and high prices, which leads to a market inefficiency. Choice C correctly reflects these changes.

Suppose a Perfectly Competitive Market Is Suddenly Transformed into One