The graph shown here illustrates the demand curve, marginal revenue curve, and the cost curves for a profit-maximizing monopolist with constant costs.

What area represents deadweight loss ("DWL") if this firm chooses a single price and what is the deadweight loss if this firm can perfectly price discriminate?

Choose 1 answer:
(A) $D W L=k l m$ for a single price monopolist; $D W L=f j k$ for a perfect price discriminating monopolist.
(B) $D W L=k i h$ for a single price monopolist; $D W L=f j k$ for a perfect price discriminating monopolist.
(c) $D W L=P_{a} f P_{b}$ for a single price monopolist; $D W L=k l m$ for a perfect price discriminating monopolist
(D) $D W L=0$ for a single price monopolist; $D W L=0$ for a perfect price discriminating monopolist
(E) $D W L=f k j$ for a single price monopolist; $D W L=0$ for perfect price discriminating monopolist.

Question

The graph shown here illustrates the demand curve, marginal revenue curve, and the cost curves for a profit-maximizing monopolist with constant costs.

What area represents deadweight loss ("DWL") if this firm chooses a single price and what is the deadweight loss if this firm can perfectly price discriminate?

Choose 1 answer:
(A) $D W L=k l m$ for a single price monopolist; $D W L=f j k$ for a perfect price discriminating monopolist.
(B) $D W L=k i h$ for a single price monopolist; $D W L=f j k$ for a perfect price discriminating monopolist.
(c) $D W L=P_{a} f P_{b}$ for a single price monopolist; $D W L=k l m$ for a perfect price discriminating monopolist
(D) $D W L=0$ for a single price monopolist; $D W L=0$ for a perfect price discriminating monopolist
(E) $D W L=f k j$ for a single price monopolist; $D W L=0$ for perfect price discriminating monopolist.

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Deadweight Loss: Deadweight loss (DWL) is the loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved. In the context of a monopoly, it represents the loss of consumer and producer surplus due to the monopolist setting a price higher than the marginal cost. ‖ ‖ b ⋮ Single Price Monopolist: For a single price monopolist, the DWL is the area between the demand curve (D) and the marginal cost curve (MC) from the quantity produced by the monopolist to the socially optimal quantity. In the given graph, this area is represented by $k l m$. ‖ ‖ c ⋮ Perfect Price Discrimination: For a perfect price discriminating monopolist, the monopolist charges each consumer their maximum willingness to pay, capturing all consumer surplus. This results in no DWL because the quantity produced is the socially optimal quantity. Therefore, the DWL is $0$. ‖ ∻Answer∻ ⚹ (E) $D W L=f k j$ for a single price monopolist; $D W L=0$ for perfect price discriminating monopolist ⚹ ∻Key Concept∻ ⚹ Deadweight Loss in Monopoly ⚹ ∻Explanation∻ ⚹ In a single price monopoly, the DWL is the area between the demand curve and the marginal cost curve from the monopolist's quantity to the socially optimal quantity. In perfect price discrimination, the monopolist captures all consumer surplus, resulting in no DWL. ⚹◊How does perfect price discrimination impact the level of deadweight loss for a monopolist compared to a single price scenario?⍭ Generate me a similar question◊

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