Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true? Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss. Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus. Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions.

The economic surplus is maximized under perfect competition. Under monopoly, the total economic surplus is less than perfect competition because there is some dead weight loss involved.

Explanation:

The economic surplus is a sum of producer surplus and consumer surplus. In the perfect competition, the economic surplus is maximized as the price is equal to equilibrium price.

In the monopoly market, the consumer surplus gets reduced and producer surplus increases. But since there is dead weight loss involved, the overall economic surplus is less than what it is in perfect market.