The economic inefficiency of a monopolist can be measured by the:
A) excess profit generated by monopoly firms.
B) poor quality of service offered by monopoly firms.
C) number of consumers who are unable to purchase the product because of its high price.
D) deadweight loss involved relative to a competitive firm.

Question

Quizplus · Accepted Answer

The deadweight loss involved relative to a competitive firm is the best measure of economic inefficiency of a monopolist. Deadweight loss is the loss of economic efficiency that occurs when a monopolist restricts output and charges a higher price than what would be charged under perfect competition. This results in a reduction in consumer and producer surplus, which is a measure of economic welfare. Therefore, a larger deadweight loss implies a larger reduction in overall economic welfare.

The Economic Inefficiency of a Monopolist Can Be Measured by The