The following figure shows revenue and cost curves of a monopolist.Figure 11.8
AR: Average revenue curve
MR: Marginal revenue curve
MC: Marginal cost curve
-According to Figure 11.8, the deadweight loss of monopoly is:

Question

The following figure shows revenue and cost curves of a monopolist.Figure 11.8

AR: Average revenue curve
MR: Marginal revenue curve
MC: Marginal cost curve
-According to Figure 11.8, the deadweight loss of monopoly is:

Quizplus · Accepted Answer

The deadweight loss of monopoly is the area of welfare loss due to the fact that the monopoly firm produces less than the socially optimal level of output. In this case, the socially optimal level of output is where the marginal cost curve intersects with the demand curve (Q* in the figure). However, the monopoly firm will choose to produce the output where the marginal revenue curve intersects with the marginal cost curve (Qm in the figure). Thus, the deadweight loss is the area of the triangle between the demand curve, the marginal cost curve, and the vertical line at Qm (ACD in the figure).

The Following Figure Shows Revenue and Cost Curves of a Monopolist.Figure