The diagram illustrates the demand curve, DC, and supply curve, SC, for a perfectly competitive industry. A monopolist acquires the industry. The monopolist’s long-run average cost curve, LRACM, is the same as the supply curve of the perfectly competitive industry. What effects will the takeover have on profit and allocative efficiency?
- Aprofit decreases; allocative efficiency decreases
- Bprofit decreases; allocative efficiency increases
- Cprofit increases; allocative efficiency decreases
- Dprofit increases; allocative efficiency increases