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-(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is a monopolist, what is deadweight loss in the long run?
A) $45
B) $90
C) $180
D) $360

Question

Use the following to answer questions: 
-(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is a monopolist, what is deadweight loss in the long run?
A) $45 
B) $90 
C) $180 
D) $360

Quizplus · Accepted Answer

Deadweight loss is the loss of consumer and producer surplus that occurs when a market is not in equilibrium. In this case, the market is not in equilibrium because Joe is a monopolist and is charging a price above marginal cost. The deadweight loss is the area of the triangle formed by the difference between the price and marginal cost and the quantity demanded. In this case, the deadweight loss is $45.

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