A monopolist creates deadweight loss primarily because it:
Correct answer: C. Restricts output below the efficient level
- A. Produces beyond the efficient output
- B. Charges a price below marginal cost
- C. Restricts output below the efficient level
- D. Faces a perfectly elastic demand curve
Explanation
A single-price monopolist restricts output and charges a price above marginal cost. Some mutually beneficial trades therefore do not occur, creating deadweight loss. The loss reflects reduced total surplus, not merely a transfer from consumers to the firm.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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