"The deadweight loss of a monopoly equals the monopoly firm's profits." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. The deadweight loss from a monopoly is the portion of consumer surplus loss that no one in society can obtain. The monopoly firm's profits represent a transfer of consumer surplus away from consumers to the monopolist, and so profits are not a deadweight loss.
You might also like to view...
All economic questions and problems arise from
A) turmoil in the stock market. B) the difference between self-interest and social interest. C) the fact that society has more than it needs. D) a society's wants exceeding what its scarce resources can produce. E) the unequal distribution of income.
If the market demand in a monopolistically competitive industry increases, a likely result in the long run will be
A) less elastic demand curves facing each firm. B) a higher ratio of price to average cost. C) a larger number of firms producing a similar product. D) a transition from monopolistic competition to oligopoly.