Deadweight loss measures the loss in society’s welfare that occurs because a monopolist does not produce the socially efficient level of output.

Question

BlackTom AI · Accepted Answer

Monopoly restricts output and raises price above marginal cost, creating a loss of total surplus that deadweight loss quantifies. 1. Relevant knowledge points and concepts - Allocative efficiency occurs when price equals marginal cost (P = MC); this maximizes total (consumer + producer) surplus. - A monopolist maximizes profit where marginal revenue equals marginal cost (MR = MC) and then sets price from the demand curve, so P > MC at the chosen quantity. - Deadweight loss (DWL) is the reduction in total surplus relative to the socially efficient (competitive) outcome; graphically it is the triangle between demand and MC for the units not produced. 2. Step-by-step reasoning - Under perfect competition, Qc is determined by P = MC. Under monopoly, Qm is determined by MR = MC, and because MR < P for a downward-sloping demand, Qm < Qc. - The units between Qm and Qc would have had value to consumers (demand price > MC) but are not produced by the monopolist; the foregone gains are the DWL. 3. Calculations (linear example showing intermediate steps) - Let demand P = a − bQ and constant MC = c. - Competitive quantity: Qc = (a − c)/b because P = MC ⇒ a − bQc = c. - Monopolist MR = a − 2bQ; set MR = MC ⇒ a − 2bQm = c ⇒ Qm = (a − c)/(2b) = Qc/2. - Monopoly price Pm = a − bQm = (a + c)/2. - DWL = 0.5 × (Qc − Qm) × (Pm − MC) = 0.5 × ((a − c)/(2b)) × ((a − c)/2) = (a − c)^2/(8b), a positive number. 4. Why the correct answer is correct - Because monopolies produce less (Qm < Qc) and charge a price above marginal cost, some mutually beneficial transactions do not occur. Deadweight loss precisely measures that lost surplus. 5. Why the other option (False) is incorrect - Claiming False would imply that monopoly does not reduce social welfare relative to the efficient output. That is generally wrong because MR < P leads to restricted output and positive DWL. (Exceptions exist only under special conditions—e.g., regulated price equal to MC or perfect first-degree price discrimination eliminating DWL—but these are special cases, not the general rule.) 6. Conclusion - The statement is True: deadweight loss measures the welfare loss from a monopolist not producing the socially efficient level of output. This matches the provided answer.

Deadweight loss measures the loss in society’s welfare that occurs because a monopolist does not produce the socially efficient level of output.判断题

类似问题

Refer to the figure below which demonstrates a $300 maximum price allowed. The triangle des is called:

Which of the following will result in the short run if the government imposes a binding quota?

You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is $1,021.61. The bond matures in 11 years. What is the yield to maturity?

Which of the following statements is CORRECT?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单