Which statement best explains the welfare cost of monopoly
A)The benefits that accrue to a monopoly firm's owners are equal to the costs that are incurred by consumers of that firm's product.
B)The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially efficient quantity.
C)The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.
D)The main social problem caused by monopoly is monopoly profit.

Question

Quizplus · Accepted Answer

The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax because both result in a reduction of total welfare by producing less than the socially optimal quantity, leading to inefficiencies in the market.

Which Statement Best Explains the Welfare Cost of Monopoly