Question

The diagram below illustrates the demand, marginal revenue, and marginal cost curves for a profit-maximizing single-price monopolist. Which area represents the deadweight loss due to the monopoly?

f + g + c+ h.
f + c.
f + g.
g + h.

Answer 1

The deadweight loss due to monopoly is represented by area f + g.

Deadweight loss is the loss of economic efficiency that occurs when a monopoly restricts output and charges a higher price than would be charged in a competitive market.

In the diagram, the area f represents the consumer surplus that is lost due to the higher price, and the area g represents the producer surplus that is lost due to the lower quantity produced.

Therefore, the correct answer is f + g.