A monopolist faces market demand given by P = 60

Question

A monopolist faces market demand given by P = 60 - Q.For this market,MR = 60 - 2Q and MC = Q.What is the deadweight loss due to the monopoly
A)$100
B)$200
C)$300
D)$400

Quizplus · Accepted Answer

The monopolist sets MR = MC to find the profit-maximizing quantity: 60 - 2Q = Q, so Q = 20. The price at Q = 20 is P = 60 - 20 = 40. In a competitive market, P = MC, so 60 - Q = Q, giving Q = 30. The deadweight loss is the area of the triangle between Q = 20 and Q = 30, with a height of 10 (the difference in price from 40 to 30), which is (1/2) * 10 * 10 = $50.