Asked by Maanasi Radhakrishnan on Apr 29, 2024
Verified
When a monopolist prevents mutually beneficial trades from occurring,total surplus increases.
Mutually Beneficial Trades
Exchanges between parties that improve the welfare of all involved, typically occurring in markets where buyers and sellers agree on terms that leave them both better off.
Monopolist
A firm that is the only producer of a good that has no close substitutes.
- Acknowledge the significance of changes in prices on the surplus received by consumers and producers.
- Understand the concept of mutually beneficial trades in the context of market efficiency.
- Recognize the conditions under which market failures occur and their impact on surplus.
Verified Answer
CR
Crystal RussellMay 02, 2024
Final Answer :
False
Explanation :
When a monopolist prevents mutually beneficial trades from occurring, total surplus decreases as there is less trade and less efficient allocation of resources. The monopolist restricts output, which raises the price and reduces quantity demanded, causing deadweight loss.
Learning Objectives
- Acknowledge the significance of changes in prices on the surplus received by consumers and producers.
- Understand the concept of mutually beneficial trades in the context of market efficiency.
- Recognize the conditions under which market failures occur and their impact on surplus.