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Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.
True / False.

Respuesta :

jepessoa

Answer:

True

Explanation:

The socially efficient level of output for a monopoly is when:

  • sales price = marginal cost

Deadweight loss is calculated using the following formula:

Deadweight Loss = .5 x (P2 - P1) x (Q1 - Q2)

where:

  • P2 = $20 (socially efficient price)
  • P1  = $50 (current price)
  • Q2 = 200 units (socially efficient quantity)
  • Q1 = 100 units (current quantity)

Deadweight Loss = .5 x ($20 - $50) x (100 - 200) = 0.5 x (-$30) x (-100) = $1,500

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