Why Does the Consumer Surplus Lost, Because Monopolists Restrict the Production

question 52

Multiple Choice

Why does the consumer surplus lost, because monopolists restrict the production of output, represent a welfare loss?

• A) because consumers pay a higher price than they would in a more competitive market
• B) because it is transferred to producers in the form of profit
• C) because the consumers will not have to pay tax on the lost consumer surplus
• D) because society is not using its scarce resources in the best way possible

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Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders, but retained by the company to reinvest in its core business or to pay debt.

Contributed Surplus

Contributed Surplus is an equity account that reflects excess amounts received by a company over the par value of its stock from the sale of shares directly to investors.

Common Shares

Equity investments that represent ownership in a company, granting holders voting rights and a share in the company's profits through dividends.

Non-Current Liability

Liabilities not due within one year or the operating cycle of the business, reflecting long-term financial commitments.