The deadweight loss from monopoly is the result of
A)marginal cost being upward-sloping.
B)irrational action on the part of consumers.
C)the higher price charged and higher quantity produced compared to competition.
D)the fact that price and marginal revenue are not the same.
E)profit maximization as a motivating factor.

Question

Quizplus · Accepted Answer

Monopolies create deadweight loss by producing less and charging more than what would occur in a competitive market. This discrepancy arises because in a monopoly, the price is set above marginal cost since the monopolist's price is greater than its marginal revenue, leading to reduced output compared to a perfectly competitive market where price equals marginal cost. This inefficiency is not directly due to profit maximization, irrational consumer behavior, the shape of the marginal cost curve, or the quantity produced, but rather the divergence between price and marginal revenue.

The Deadweight Loss from Monopoly Is the Result of