Answer:
False. A monopolist cannot convert the entire customer surplus into profit. Customer surplus refers to the extra value that customers receive when they purchase a product at a price lower than what they are willing to pay. In a monopoly, where a single firm has control over the market, the firm has the ability to set prices higher than the marginal cost of production.
When a monopolist raises prices, it reduces consumer surplus as some customers are no longer willing to pay the higher price and choose not to buy the product. However, the monopolist cannot capture the entire customer surplus as there will always be some consumers who are willing to pay more than the monopolist charges. These customers still receive some surplus, known as producer surplus, which is the difference between the price they pay and the marginal cost of production.
To illustrate this, let's consider a monopolist selling a unique product. Initially, the monopolist sets the price at a level where the customer surplus exists. As the monopolist raises the price, some customers will no longer be willing to pay the higher price and will not purchase the product. This reduces the customer surplus. However, there will still be some customers who are willing to pay the higher price, resulting in a portion of customer surplus being converted into producer surplus for the monopolist.
In summary, while a monopolist can reduce customer surplus by setting higher prices, it cannot convert the entire customer surplus into profit because there will always be some customers willing to pay more than the monopolist charges.
Step-by-step explanation: