Exhibit 9-15 Why might the true deadweight loss from a nondiscriminating monopolist be less than the loss indicated in Exhibit 9-15?

Question

Exhibit 9-15  Why might the true deadweight loss from a nondiscriminating monopolist be less than the loss indicated in Exhibit 9-15?

Quizplus · Accepted Answer

A nondiscriminating monopolist may charge lower prices to discourage potential entrants from entering the market, thereby reducing the deadweight loss. This is because the lower prices make it less profitable for new firms to enter and compete with the monopolist. This is known as limit pricing. Therefore, the true deadweight loss may be less than the loss indicated in Exhibit 9-15.

Exhibit 9-15 Why Might the True Deadweight Loss from a Nondiscriminating