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?
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.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Business 100: Intro to BusinessChapter 3 / Lesson 3