Final answer:
A monopoly seeks to maximize profits by producing at a quantity where marginal revenue equals marginal cost. However, this often leads to a deadweight loss because the monopoly produces less output than the socially optimal level.
Step-by-step explanation:
A monopoly can seek out the profit-maximizing level of output by calculating marginal revenue and marginal cost. The profit-maximizing quantity occurs where marginal revenue is equal to marginal cost, represented by MR = MC. This quantity can be identified graphically by the intersection of the marginal revenue and marginal cost curves.
The deadweight loss associated with a monopoly occurs because the monopolist produces an output level less than the socially optimal level. This means that the monopoly restricts its production to a lower quantity than what would be produced in a competitive market. As a result, there is a loss of consumer surplus and overall efficiency in the market.