Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry.We can assume that monopoly output will be _____ than will the competitive output and that _____.
A)higher;deadweight loss will emerge
B)lower;consumer surplus will increase
C)lower;deadweight loss will emerge
D)higher;consumer surplus will decrease

Question

Quizplus · Accepted Answer

When a perfectly competitive industry transforms into a monopoly industry, the output is likely to decrease as the monopolist restricts supply to increase prices and profits. This decrease in output results in a deadweight loss, as some consumers who were willing and able to pay the competitive price are now excluded from the market due to the higher monopoly price. Therefore, the correct choice is C, where the output is lower and deadweight loss emerges.

Suppose a Perfectly Competitive Industry Is Suddenly Transformed into a Monopoly