What is deadweight loss? Whose loss is it? Explain
What will be an ideal response?
Deadweight loss is the portion of consumer surplus that no one in society is able to obtain in a situation of a monopoly. It is a loss by consumers because the failure of the monopolist to produce as many units as would have been produce under perfect competition eliminates consumer surplus that otherwise would have been a benefit to consumers.
You might also like to view...
Which of the following is not an example of informal institutions?
A) Culture B) Laws C) Ethics D) Norms.
In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources
A) marginal cost of a computer exceeds the marginal benefit of a computer, so more computers B) marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers C) marginal benefit of a computer exceeds the marginal cost of a computer, so more computers D) marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers
Horizontal and vertical demand curves
A) have constant elasticities. B) are not possible in the real world. C) have elasticities that change with price. D) cannot have their elasticities computed using the point method.
The loss of the profit motive by a publicly owned natural monopoly could:
A. increase the motivation to improve efficiency. B. reduce the motivation to improve efficiency. C. increase the incentive to provide better service. D. increase the incentive to lower costs.