A monopoly creates a deadweight loss because the monopoly
A) sets a price that is too low.
B) makes a normal profit.
C) does not maximize profit.
D) produces less than the efficient quantity.
E) produces more than the efficient quantity.

Question

Quizplus · Accepted Answer

A monopoly produces less than the efficient quantity because it restricts output in order to increase prices and profits. As a result, there is a deadweight loss, which is the loss of consumer and producer surplus that occurs when the monopoly produces less than the efficient quantity. This inefficiency leads to a deadweight loss, which represents a loss of social welfare.

A Monopoly Creates a Deadweight Loss Because the Monopoly