A welfare loss occurs when a monopolist chooses not to produce units of output that are of greater marginal value to consumers than what it costs to produce them.

Question

Quizplus · Accepted Answer

A monopolist may choose to produce fewer units of output than the socially optimal level, where marginal cost equals marginal benefit. This results in a welfare loss for society since consumers who value the additional units of output at more than the marginal cost of producing them are not able to purchase them, leading to a reduction in overall economic efficiency and consumer surplus.

A Welfare Loss Occurs When a Monopolist Chooses Not to Produce