Question

Suppose the GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect the _____ surplus to increase and _____ surplus to decrease after the breakup.

Answer 1

Consumer surplus and total surplus; the producer surplus would decrease from the breakup.

Step-by-step explanation:

In the case of monopoly, there is deadweight loss in the economy and consumer surplus is less and producer surplus is high. If a monopoly is broken up and perfect competition arrives, then the consumer surplus increases and the producer surplus decreases. Also, deadweight loss becomes zero and total surplus increases.