Consider a profit-maximising monopoly pricing under the following conditions.The profit-maximising price charged for goods produced is $18.The intersection of the marginal-revenue and marginal-cost curves occurs where output is 10 units and marginal cost is $6.The socially efficient level of production is 14 units.The demand curve and marginal-cost curves are linear.What is the deadweight loss?
A)$6
B)$24
C)$48
D)not enough information is given to answer this question

Question

Quizplus · Accepted Answer

The deadweight loss can be calculated using the formula:

Deadweight loss = 0.5*(Pmonopoly - Pefficient)* (Qefficient - Qmonopoly)

where, Pmonopoly is the price charged by the monopolist, Pefficient is the socially efficient price, Qmonopoly is the quantity produced by the monopolist, and Qefficient is the socially efficient quantity.

Given:

Pmonopoly = $18
Qmonopoly = 10
MEfficient = $6
Qefficient = 14

The socially efficient price can be found by equating marginal cost to marginal revenue, which is $6 in this case. So, Pefficient = $6.

Therefore,

Deadweight loss = 0.5*(18-6)*(14-10) = $24.

Hence, the correct answer is B.

Consider a Profit-Maximising Monopoly Pricing Under the Following Conditions