If one producer has control over an entire market and underproduces,the producer will
A) increase producer surplus by lowering pollution costs.
B) increase consumer surplus by lowering producer surplus.
C) increase both consumer and producer surplus.
D) create a deadweight loss.
E) decrease the deadweight loss that would exist if the market were efficient.

Question

Quizplus · Accepted Answer

If the producer has control over the entire market, they can restrict the supply of the good, which will result in an increase in the price. This, in turn, will decrease the quantity demanded and create a deadweight loss, which represents a reduction in economic efficiency. Therefore, the producer underproducing would create a deadweight loss.

If One Producer Has Control Over an Entire Market and Underproduces,the