This graph shows the cost and revenue curves faced by a monopoly.
According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that:
A)the monopoly creates deadweight loss.
B)the perfectly competitive firm would lose money in this industry.
C)the perfectly competitive firm would produce Q1 units.
D)the monopolist would charge P3 and the perfectly competitive firm would charge P1.

Question

This graph shows the cost and revenue curves faced by a monopoly. 
According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that:
A)the monopoly creates deadweight loss. 
B)the perfectly competitive firm would lose money in this industry. 
C)the perfectly competitive firm would produce Q1 units. 
D)the monopolist would charge P3 and the perfectly competitive firm would charge P1.

Quizplus · Accepted Answer

The intersection of the marginal cost curve with the demand curve in a perfectly competitive market is the efficient output level (Q1) and price (P1). The price charged by the monopolist (P3) is higher than the price charged in perfect competition, leading to a smaller quantity supplied (Q2). This difference between the monopoly quantity and the efficient quantity represents deadweight loss. Therefore, the correct choice is A.

This Graph Shows the Cost and Revenue Curves Faced by a Monopoly