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From society's perspective, is it better for a market to be served by one firm - a price-setting...

Question:

From society's perspective, is it better for a market to be served by one firm - a price-setting monopoly, or by many small price-taking firms?

Social Welfare:

One way economists measure social welfare is through total surplus which is simply equal to the sum of consumer surplus and producer surplus.

Answer and Explanation:

It is better for society to have many small price-taking firms because that increases total welfare as consumer and producer surplus is maximized without exhibiting any dead-weight loss. This is because monopolies artificially inflate the price of a good by reducing the supply.


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