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The social cost of monopoly refers to the fact that a
The social cost of monopoly refers to the fact that
a. there are no net gains to society at the output level produced by the monopolist.
b. resource owners hired by the monopolist gain at the expense of consumers.
c. at the output level produced by the monopolist, no one can be made better off without having the owners of the resources used by the monopolist made worse off.
d. the marginal benefit of the monopolist's product to society exceeds the marginal cost of producing it.
Expert Solution
The answer is b).
The social cost of monopoly refers to the deadweight loss created by the monopoly, by producing at a level of output that is below the socially optimal level. In this way, the monopolist extracts consumer surplus from consumers to increase their own profit, but at the same time creates loss in total surplus.
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