When the firm is producing at the monopoly equilibrium,its producer surplus will be ________ and the consumer surplus will be ________ than if the industry was competitive.
A) higher; lower
B) higher; higher
C) lower; lower
D) lower; higher

Question

Quizplus · Accepted Answer

In a monopoly equilibrium, the firm has market power and can charge a higher price than in a competitive market, resulting in a higher producer surplus. However, the higher price also reduces the quantity demanded, leading to a lower consumer surplus than in a competitive market where the price is lower and quantity demanded is higher. Therefore, the producer surplus will be higher, and the consumer surplus will be lower than in a competitive market.

When the Firm Is Producing at the Monopoly Equilibrium,its Producer