Suppose a monopolist is at the profit-maximizing output level. If the monopolist sells another unit of output:
A) both producer surplus and consumer surplus increase.
B) producer surplus falls but consumer surplus rises.
C) both producer surplus and consumer surplus decrease.
D) producer surplus rises but consumer surplus falls.

Question

Quizplus · Accepted Answer

When a monopolist sells an additional unit beyond the profit-maximizing output, the price must be lowered for all units sold, reducing producer surplus. However, consumer surplus increases because consumers pay a lower price.

Suppose a Monopolist Is at the Profit-Maximizing Output Level