Exhibit 10-8
-Which of the following statements is always correct?
A)Inefficiency is likely to occur under competition but is unlikely to occur in the monopoly market structure.
B)A competitive firm is more able to engage in research and development than is a monopoly.
C)Monopolies transfer some of the potential consumer surplus from buyers to sellers.
D)Monopolies transfer some of the potential producer surplus from sellers to buyers.
E)Monopolies transfer all of the potential consumer surplus from buyers and sellers to the government.

Question

Exhibit 10-8 
-Which of the following statements is always correct?
A)Inefficiency is likely to occur under competition but is unlikely to occur in the monopoly market structure. 
B)A competitive firm is more able to engage in research and development than is a monopoly. 
C)Monopolies transfer some of the potential consumer surplus from buyers to sellers. 
D)Monopolies transfer some of the potential producer surplus from sellers to buyers. 
E)Monopolies transfer all of the potential consumer surplus from buyers and sellers to the government.

Quizplus · Accepted Answer

Monopolies are able to use their market power to charge higher prices and transfer some of the potential consumer surplus to sellers. This is one of the main drawbacks of monopolies, as it results in a loss of total welfare in the market. In contrast, under perfect competition, firms have little market power, and prices are determined by the forces of supply and demand, leading to greater efficiency and consumer surplus. Option A, B, D, and E are incorrect.

Exhibit 10-8 -Which of the Following Statements Is Always Correct