Why does a efficiency loss arise under monopoly rather than under perfect competition?
A)A monopolist charges a lower price for the product to gain market entry.
B)A monopolist sells a lesser quantity at a higher price.
C)There is a net increase in consumer surplus but a net decline in producer surplus.
D)There is an increase in producer surplus,consumer surplus remaining unchanged.
E)A monopolist sells a greater quantity than a perfect competitor.

Question

Quizplus · Accepted Answer

Under monopoly, the monopolist has the power to set the price and output level, unlike under perfect competition, where market forces determine the price and output level. The monopolist chooses to produce and sell a lesser quantity of the product at a higher price, resulting in a loss of efficiency known as deadweight loss. This occurs because there are potential consumers who are willing to pay more for the product than it costs to produce, but they do not buy it due to the higher price, resulting in a loss of overall welfare for society.

Why Does a Efficiency Loss Arise Under Monopoly Rather Than