An appropriate way to measure the economic inefficiency of a monopoly is the:
A)number of consumers who are unable to purchase the product because of its high price
B)deadweight loss
C)low wages paid to the monopolist's workers
D)poor quality of service offered by monopoly firms

Question

Quizplus · Accepted Answer

Deadweight loss is the appropriate way to measure the economic inefficiency of a monopoly because it represents the loss of consumer surplus and producer surplus that occurs when a monopoly reduces output to increase prices. This loss is a measure of inefficiency, as there could be a higher level of output and welfare if the monopoly did not exist. The other options - number of consumers who are unable to purchase the product, low wages paid to workers, and poor quality of service - are all potential negative consequences of a monopoly, but they do not directly measure economic inefficiency.

An Appropriate Way to Measure the Economic Inefficiency of a Monopoly