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Scenario: Monopolist
The demand curve for a monopolist is P = 75 -- 0.5Q,and the monopolist's marginal cost curve is defined using the equation MC = 2Q.Assume also that ATC at the profit-maximizing level of production is equal to $12.50.
-(Scenario: Monopolist)Use Scenario: Monopolist.The deadweight loss from this monopolist's production is:
A) $31.25.
B) $12.50.
C) $0.00
D) $30.00.

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Quizplus · Accepted Answer

The deadweight loss in a monopoly is the loss of economic efficiency when the equilibrium outcome is not achieved. It can be calculated by finding the difference between the quantity produced by the monopolist and the socially optimal quantity (where P = MC), and then calculating the area of the triangle formed by this difference and the demand curve.

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