How does a monopoly transfer consumer surplus to itself? What ...

[chads108]

How does a monopoly transfer consumer surplus to itself?
 
  What will be an ideal response?

Question 2

Which of the following does not take place in the direct finance market?
 
  A) Ownership in corporations is sold in the form of preferred stock.
  B) Ownership in corporations is sold in the form of common stock.
  C) Corporate bonds are sold to savers.
  D) Deposits from savers are accumulated and loans made to borrowers.

[britb2u]

Answer to Question 1

The monopoly raises price by lowering the quantity offered for sale. This raises the price consumers must pay for the good compared to the competitive market price. This difference in price multiplied by the quantity the monopolist sells represents the amount of consumer surplus that is transferred to producer surplus.

Answer to Question 2

D