Figure 15-8

-Refer to Figure 15-8.The deadweight loss caused by a profit-maximizing monopoly amounts to

Question

Figure 15-8
 
-Refer to Figure 15-8.The deadweight loss caused by a profit-maximizing monopoly amounts to

Quizplus · Accepted Answer

The deadweight loss in a monopoly is the loss of consumer and producer surplus that occurs when a monopolist restricts output and charges a higher price than would be charged in a perfectly competitive market. In Figure 15-8, the monopolist's profit-maximizing price is Pm, which is higher than the competitive price of Pc. The deadweight loss is the triangular area between the demand and supply curves, from the point where the monopolist produces down to the quantity where the competitive price would have been charged. This area is $250, which is the answer choice C.

Figure 15-8 -Refer to Figure 15-8.The Deadweight Loss Caused by a Profit-Maximizing