Can dead weight loss of a monopoly be lower than social cost of monopoly? True or false.
To determine whether the deadweight loss of a monopoly can be lower than the social cost of monopoly, we need to understand what each term represents.
The deadweight loss of a monopoly refers to the economic inefficiency created when a monopolistic market restricts output and charges higher prices compared to a hypothetical competitive market. In other words, it represents the value of the foregone surplus that would have been generated if the market was perfectly competitive.
On the other hand, the social cost of monopoly includes deadweight loss, but it also takes into account other costs such as reduced consumer surplus, decreased product variety, and potential innovation suppression caused by monopolistic behavior. It represents the overall negative impact on society resulting from the presence of a monopoly.
Based on these definitions, the social cost of monopoly is expected to be higher than the deadweight loss of a monopoly. This is because the social cost encompasses all the negative effects, including deadweight loss, but adds other detrimental consequences as well.
Therefore, the statement "Can deadweight loss of a monopoly be lower than social cost of monopoly?" is false. The social cost of monopoly is generally expected to be higher than the deadweight loss.