A monopolist faces market demand given by P = 250

Question

A monopolist faces market demand given by P = 250 - 0.5Q.For this market,MR = 250 - Q and MC = 100.What is the deadweight loss due to the monopoly

Quizplus · Accepted Answer

The deadweight loss is calculated as the area of the triangle formed between the monopoly quantity and the competitive quantity. The competitive quantity is where P = MC, so 250 - 0.5Q = 100, giving Q = 300. The monopoly quantity is where MR = MC, so 250 - Q = 100, giving Q = 150. The price at the monopoly quantity is P = 250 - 0.5(150) = 175. The deadweight loss is 0.5 * (300 - 150) * (175 - 100) = 0.5 * 150 * 75 = $5625.