The pricing in monopoly prevents some mutually beneficial trades.The value of these unrealized mutually beneficial trades is called:
A)sunk costs.
B)opportunity costs.
C)deadweight loss.
D)inequity.

Question

Quizplus · Accepted Answer

Deadweight loss is the cost incurred due to inefficient allocation of resources. In a monopoly, the pricing strategy set by the monopolist can prevent some mutually beneficial trades, leading to a loss of potential economic welfare. This loss is known as deadweight loss. Sunk costs are costs that have already been incurred and cannot be recovered. Opportunity costs are the cost of the next best alternative forgone. Inequity refers to a lack of fairness or justice in the allocation of resources. None of these terms accurately describe the value of unrealized mutually beneficial trades in a monopoly.

The Pricing in Monopoly Prevents Some Mutually Beneficial Trades