Question

Are monopolies economically​ efficient? Consider the market to the right. Compared to the perfectly competitive​ outcome, what would be the change in surplus if instead the market had one supplier that was a ​ monopoly? Use the triangle drawing tool to shade in the change in surplus. Properly label this shaded area. Carefully follow the instructions​ above, and only draw the required objects.

Answer 1

Monopolies are not economically efficient. They result in a loss of overall surplus compared to perfectly competitive markets.

Step-by-step explanation:

A monopoly is not economically efficient compared to a perfectly competitive market. In a perfectly competitive market, there are many sellers and buyers, leading to allocative efficiency where resources are allocated optimally. However, a monopoly has no competition and therefore has the ability to control prices and restrict output, resulting in inefficiency.

Compared to a perfectly competitive market, a monopoly would reduce consumer surplus and producer surplus, resulting in a loss of overall surplus. The shaded area in the triangle drawing tool would represent this change in surplus, and it would be labeled as 'Loss of Surplus'.

Answer 2

No monopoly is not economically efficient

Step-by-step explanation:

Monopolies are not economically efficient compared to perfect competition, because in perfect competition the firms will set a particular cost for a product that is accessible to all customers. The supply of the commodity will be less, and the cost will be higher if the market had only one supplier. The economic gains are higher in perfect competition because the total gains from the commodity are far less in monopoly compared to perfect competition.