-The figure above shows the market for umbrellas in Sunville. Suppose one firm owns all umbrella stores in Sunville and charges $40 per umbrella. In this situation, the market for umbrellas is
A) efficient, with no deadweight loss but also no surplus.
B) inefficient, with a deadweight loss of $2,666.67.
C) inefficient, with a deadweight loss of $1,333.33.
D) efficient, generating a total surplus of more than $10,000.

Question

-The figure above shows the market for umbrellas in Sunville. Suppose one firm owns all umbrella stores in Sunville and charges $40 per umbrella. In this situation, the market for umbrellas is
A) efficient, with no deadweight loss but also no surplus. 
B) inefficient, with a deadweight loss of $2,666.67. 
C) inefficient, with a deadweight loss of $1,333.33. 
D) efficient, generating a total surplus of more than $10,000.

Quizplus · Accepted Answer

The monopoly pricing at $40 per umbrella leads to a reduction in quantity sold compared to a competitive market, creating a deadweight loss of $1,333.33 due to lost consumer and producer surplus.

-The Figure Above Shows the Market for Umbrellas in Sunville