The correct answer is: Both A and B are correct.
A monopoly is a market structure in which there is only one seller of a good or service. This means that the monopolist has a great deal of market power and can charge a higher price than would be possible in a competitive market. As a result, consumers are worse off under monopoly than they would be under competition.
In addition, monopolies tend to misallocate resources. This is because the monopolist is not subject to the same competitive pressures as firms in a competitive market. As a result, the monopolist may produce less than the socially optimal level of output and charge a higher price than would be necessary to cover costs.
Both of these factors lead to a welfare loss under monopoly. This means that society as a whole is worse off under monopoly than it would be under competition.
Here is a more detailed explanation of each option:
- Option A: There is a transfer of income from consumers to the monopolist.
Under monopoly, the monopolist is able to charge a higher price than would be possible in a competitive market. This means that consumers pay more for the good or service, and the monopolist receives more revenue. This is a transfer of income from consumers to the monopolist.
- Option B: There is welfare loss as resources tend to be misallocated under monopoly.
As mentioned above, monopolies tend to misallocate resources. This is because the monopolist is not subject to the same competitive pressures as firms in a competitive market. As a result, the monopolist may produce less than the socially optimal level of output and charge a higher price than would be necessary to cover costs. This leads to a welfare loss, as society as a whole is worse off under monopoly than it would be under competition.