Why does monopoly necessarily reduce consumer surplus compared to perfect competition?
What will be an ideal response?
In a monopoly market consumers consume less of the product and pay a higher price for the product. Since getting to consume less reduces consumer surplus and a higher price reduces consumer surplus, the combination of them necessarily reduces consumer surplus.
You might also like to view...
Use the figure below to answer the following question.
The diagram shows three supply curves for apples today. Which of the following would cause the current supply of apples to shift from S1 to S3?
A. an increase in the number of corn farmers B. expectations of lower apple prices in the future C. a decrease in the price of apples in the market D. expectations of higher apple prices in the future
Between 1864 and 1900, the largest portion of railroad track (as a percentage of total annual construction) was laid in which region of the U.S.?
a. the Southeast b. the Northeast c. the Pacific Northwest d. the Great Plains region
If a firm faces a downward-sloping demand curve, its marginal revenue is
a. less than its marginal cost b. greater than price c. less than price d. equal to price e. equal to its total revenue
In which of the following is the relationship of price (P) to marginal cost (MC) such that the gains to society as a whole from producing additional marginal units will be greater than the costs?
a. P = MC b. P > MC c. P > MC d. P / MC