Chapter 62, Problem 6MCQ

To determine

In a monopoly deadweight loss arises due to.

Answer to Problem 6MCQ

(e) An inefficiency and low quantity of output.

Explanation of Solution

Monopolist charge higher prices due to a lack of competition which reduces consumer surplus and output demand. As a result, quantity reduces which gives rise to deadweight loss and causes inefficiency. Hence, option (e) is correct.

In the monopoly, producer surplus increases, and consumer surplus fall. Hence, option (a) is incorrect.

In a monopoly market, monopolists earn a higher profit than in a perfectly competitive market. Hence, option (b) is incorrect.

In a monopoly, the monopolist charges a higher price due to a lack of competition. Hence, option (c) is incorrect.

In both a monopoly market and a perfectly competitive market, firms incur the same input cost so option (d) is incorrect.

Economics Concept Introduction

In a monopoly market, there is a single seller and a large number of buyers, and the seller charges a higher price which reduces the quantity and gives rise to inefficiency and deadweight loss.