Figure 15-12

Figure 15-12 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-12.If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area
A)ABF.
B)ABEG.
C)ACE.
D)EFG.

Question

Figure 15-12
  
Figure 15-12 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-12.If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area
A)ABF. 
B)ABEG. 
C)ACE. 
D)EFG.

Quizplus · Accepted Answer

The deadweight loss in a monopoly is the loss of economic efficiency when the equilibrium outcome is not achieved. In the context of the figure, it is represented by the area between the demand curve and the marginal cost curve, over the quantity range where the monopoly restricts output. This is typically shown as area ACE.

Figure 15-12 Figure 15-12 Shows the Cost and Demand Curves for a and Demand