Figure 15-6

-Refer to Figure 15-6.What is the deadweight loss caused by a profit-maximizing monopoly

Question

Figure 15-6
 
-Refer to Figure 15-6.What is the deadweight loss caused by a profit-maximizing monopoly

Quizplus · Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not Pareto efficient. In this case, the monopoly is producing at a quantity of 8 and charging a price of $58, which is above the marginal cost of production. The socially efficient quantity is at a quantity of 12 where the demand curve intersects the marginal cost curve. The deadweight loss is the shaded triangle between the demand curve, marginal cost curve, and monopoly's supply curve. Using the formula for the area of a triangle, the deadweight loss is ($50 - $42) x (12-8)/2 = $100. Therefore, the best choice is C) $250, which is the difference between the monopoly's profit and the total social surplus at the efficient quantity.

Figure 15-6 -Refer to Figure 15-6.What Is the Deadweight Loss Caused by Deadweight