Refer to the accompanying figure to answer the following questions.

-Deadweight loss exists in a monopoly because the monopolist
A) charges a price equal to marginal cost,which is higher than the price charged in a competitive market.
B) produces a quantity that is higher than the quantity produced in a competitive market.
C) makes a positive economic profit in the short run.
D) charges a price below marginal cost.
E) charges a price that is above marginal revenue.

Question

Refer to the accompanying figure to answer the following questions.
 
-Deadweight loss exists in a monopoly because the monopolist
A) charges a price equal to marginal cost,which is higher than the price charged in a competitive market. 
B) produces a quantity that is higher than the quantity produced in a competitive market. 
C) makes a positive economic profit in the short run. 
D) charges a price below marginal cost. 
E) charges a price that is above marginal revenue.

Quizplus · Accepted Answer

Deadweight loss exists in a monopoly because the monopolist charges a price that is above marginal cost and therefore above the efficient level of output. The price charged by the monopolist is also above marginal revenue, which results in a loss of consumer surplus and deadweight loss. A monopolist charging a price below marginal cost would not be sustainable in the long run.

Refer to the Accompanying Figure to Answer the Following Questions