Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $4,000.

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The deadweight loss in a monopoly can be visualized as a triangle on a graph where the base is the difference between the socially efficient quantity and the monopoly quantity (200 - 100 = 100 units) and the height is the difference between the price the monopolist charges and the marginal cost ($50 - $10 = $40). The area of this triangle, which represents the deadweight loss, is 0.5 * base * height = 0.5 * 100 * 40 = $2,000, not $4,000.

Suppose a Profit-Maximizing Monopolist Faces a Constant Marginal Cost of $10