In comparison to perfect competition, monopoly price-quantity combinations generate
A)a consumer surplus that is larger.
B)a producer surplus that is smaller.
C)total revenue to the producer that is smaller.
D)deadweight loss.

Question

Quizplus · Accepted Answer

Monopoly price-quantity combinations generate deadweight loss due to the fact that the quantity produced is lower than the socially optimal level, causing a loss in efficiency and surplus. This is not the case in perfect competition where the quantity produced is at the socially optimal level, leading to a higher consumer surplus and no deadweight loss. Monopoly price-quantity combinations may also result in higher prices and lower quantities, reducing consumer surplus and potentially decreasing overall welfare. The producer surplus in a monopoly is typically larger than in perfect competition as they can charge higher prices due to the lack of competition.

In Comparison to Perfect Competition, Monopoly Price-Quantity Combinations Generate