Answer to Question #143887 in Finance for Mr. Dinesh Pal Singh

Question

70. How is the dead weight loss from monopoly affected by the slope of the demand curve?

Answer 1

Dead weight loss leads to market in efficiency. It occurs when supply and demand are out of equilibrium.

Price ceiling on a monopoly lowers dead weight loss. This makes marginal revenue and demand curve to be horizontal at price ceiling. Once the price ceiling touches demand curve, the demand curve continues to slope downward causing a kinked demand curve.