Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are
A)of little concern to society.
B)a deadweight loss to society.
C)a sunk cost to society.
D)also observed in competitive markets.

Question

Quizplus · Accepted Answer

Monopoly pricing leads to a deadweight loss to society because it prevents some mutually beneficial trades from taking place. This means that there are some trades that could happen between consumers and producers that would make both parties better off, but are prevented by the higher prices set by the monopolist. As a result, society as a whole misses out on these gains from trade, which is a deadweight loss. This is not observed in competitive markets where prices are set at the equilibrium level, allowing all mutually beneficial trades to take place.

Monopoly Pricing Prevents Some Mutually Beneficial Trades from Taking Place