Consider the monopoly in the figure below with price regulated at $2 per unit. Deadweight loss resulting from the unregulated monopoly price is _________ than the deadweight loss resulting from the regulated price.
A) greater
B) less
C) no different
D) There is insufficient information to determine the difference in the deadweight loss between the regulated and unregulated prices.

Question

Consider the monopoly in the figure below with price regulated at $2 per unit. Deadweight loss resulting from the unregulated monopoly price is _________ than the deadweight loss resulting from the regulated price. 
A) greater 
B) less 
C) no different 
D) There is insufficient information to determine the difference in the deadweight loss between the regulated and unregulated prices.

Quizplus · Accepted Answer

The deadweight loss resulting from the unregulated monopoly price is the shaded triangle between the demand and marginal cost curves. At the regulated price of $2 per unit, the deadweight loss is zero. Therefore, the deadweight loss resulting from the regulated price is less than the deadweight loss resulting from the unregulated price.

Consider the Monopoly in the Figure Below with Price Regulated