Comparing single-price monopoly to perfect competition, monopoly
A) has no consumer surplus.
B) increases the amount of consumer surplus.
C) decreases the amount of consumer surplus.
D) decreases the amount of economic profit.
E) has the same amount of consumer surplus.

Question

Quizplus · Accepted Answer

In a single-price monopoly, the firm restricts output to maximize profits, which results in a higher price and a lower quantity produced compared to perfect competition. As a result, consumers are willing to pay a higher price than in perfect competition, resulting in a transfer of consumer surplus to the monopoly producer in the form of higher profits. Therefore, a monopoly decreases the amount of consumer surplus compared to perfect competition.

Comparing Single-Price Monopoly to Perfect Competition, Monopoly