A monopolist faces market demand given by P = 75

Question

A monopolist faces market demand given by P = 75 - Q.For this market,MR = 75 - 2Q and MC = Q.What is the deadweight loss due to the monopoly
A)$156.25
B)$312.50
C)$468.75
D)$937.50

Quizplus · Accepted Answer

The monopolist sets MR = MC to find the quantity, so 75 - 2Q = Q, giving Q = 25. The price is P = 75 - 25 = 50. In a competitive market, P = MC, so 75 - Q = Q, giving Q = 37.5. The deadweight loss is the area of the triangle with base (37.5 - 25) and height (50 - 37.5), which is 0.5 * 12.5 * 12.5 = $156.25.