If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?
A) The producer benefits, but consumers and society are harmed.
B) The producer and society are harmed, but consumers benefit.
C) The producer and society benefit, but consumers are harmed.
D) The producer is harmed, but consumers and society benefit.
E) The producer, consumers, and society all benefit.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, prices are set by the market demand and supply. In a monopoly, the producer has the power to set prices higher than the competitive level. As a result, the producer benefits from higher profits, but consumers and society are harmed by paying higher prices. Therefore, the correct choice is A, where the producer benefits, but consumers and society are harmed.

If a Perfectly Competitive Industry Becomes a Monopoly and the Costs