Question

With respect to monopolies, deadweight loss refers to the A) lost consumer surplus from monopolistic pricing. B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy. C) socially unproductive amounts of money spent to obtain or acquire a monopoly. D) none of the above.

Answer 1

Option B

B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy

A monopoly produces at MR=MC to maximize profit, so there is a loss in the social surplus because a social surplus is maximum at P=MC, and in this market, the demand curve for the firm is downward sloping, so the MR is not equal to demand curve so there is a deadweight loss in the market.

It is equal to the net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy.

answered by: anonymous