Refer to the accompanying figure to answer the following questions.

-If this firm is profit maximizing,society would experience ________ in deadweight loss.
A) $0
B) $112.50
C) $720
D) $525
E) $240

Question

Refer to the accompanying figure to answer the following questions.
 
-If this firm is profit maximizing,society would experience ________ in deadweight loss.
A) $0 
B) $112.50 
C) $720 
D) $525 
E) $240

Quizplus · Accepted Answer

The profit-maximizing quantity for the firm is where marginal revenue (MR) equals marginal cost (MC), which is at a quantity of 9. At this quantity, the price is $10 and the MC is $9, resulting in a profit of $9. At a quantity of 9, the social marginal cost (SMC) is also $9, meaning there is no deadweight loss. At quantities above or below 9, there is deadweight loss. The deadweight loss triangles are equal in size at quantities of 8 and 10, each being $525. Therefore, the best choice is D, which represents the total deadweight loss at 8 and 10, equaling $1050/2=$525.

Refer to the Accompanying Figure to Answer the Following Questions