Which of the following statements is correct?
A)The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product.
B)The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity.
C)The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.
D)The primary social problem caused by monopoly is monopoly profit.

Question

Quizplus · Accepted Answer

The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax because both result in a reduction of total welfare by creating a gap between the price consumers pay and the cost of production, leading to underproduction relative to the socially efficient level.

Which of the Following Statements Is Correct