Question

Graphically depict the deadweight loss caused by a monopoly. Graph must be labeled appropriately to receive full credit.

Answer 1

Answer)

Dead weight loss in a monopoly is due to reduction in quantity sold the optimum Qc it arises because consumer surplus and producer surplus under monopoly do not add up to the level reached under perfect competition. At output Qm market has buyers whose willingness to pay is higher than willingness to sell of the producer but the firm being a price maker takes a decision based on the basis of marginal gain and firm optimises itself at Em therefore monopoly market has dead weight loss due to lesser output sold and not due to profit of the monopolist.

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