(Figure: The Home Monopolist's Market) The graph shows a home monopolist market with free and with the imposition of a tariff. What is the value of the country's deadweight loss due to the tariff?

Question

Quizplus · Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not Pareto optimal. In the graph, the tariff causes the price to increase from Pw to Pt, resulting in a decrease in consumer surplus and an increase in producer surplus. The deadweight loss due to the tariff can be calculated as the area of the triangle between the free trade equilibrium quantity, the tariff quantity, and the demand curve. Using the formula for the area of a triangle, the deadweight loss is:
(½) x (12-4) x (2,450-1,750) = $1,225
Therefore, the correct answer is C.

(Figure: the Home Monopolist's Market) the Graph Shows a Home