Which of the following market structures results in a deadweight loss in the long run?
A)Perfect competition and monopolistic competition
B)Monopolistic competition and monopoly
C)Perfect competition and monopoly
D)All of these market structures lead to a deadweight loss in the long run

Question

Which of the following market structures results in a deadweight loss in the long run? ​
A)​Perfect competition and monopolistic competition
B)Monopolistic competition and monopoly
C)​Perfect competition and monopoly
D)​All of these market structures lead to a deadweight loss in the long run

Quizplus · Accepted Answer

In the long run, monopolistic competition and monopoly both lead to a deadweight loss. In monopolistic competition, firms have some market power and can charge a higher price than the perfectly competitive market. This leads to a decrease in consumer surplus and an increase in producer surplus, resulting in a deadweight loss. In monopoly, the firm has complete market power and can charge a price higher than the competitive price, resulting in a decrease in consumer surplus and an increase in producer surplus. This also leads to a deadweight loss. Perfect competition, on the other hand, leads to efficient outcomes and no deadweight loss in the long run. Therefore, the correct choice is B.

Which of the Following Market Structures Results in a Deadweight