If a monopolist set the quantity produced at MR = MC and charge a price according to the market demand curve,then:
A)a deadweight loss is created as a result of a lower consumer surplus.
B)a deadweight loss is created as a result of a higher consumer surplus.
C)a deadweight loss is created as a result of a loss to the monopolist.
D)a deadweight loss is created as a result of higher output produced and higher price charged by the monopolist.

Question

Quizplus · Accepted Answer

When a monopolist sets the quantity produced at MR = MC and charges a price according to the market demand curve, they will produce a lower quantity than the socially efficient level of output. This results in a deadweight loss, which is the loss in consumer surplus due to the underproduction of the good. Therefore, choice A is correct as it explains that a deadweight loss is created as a result of a lower consumer surplus.

If a Monopolist Set the Quantity Produced at MR =