The Deadweight Loss Associated with Monopoly Compared to Perfect Competition

question 50

Multiple Choice

The deadweight loss associated with monopoly compared to perfect competition is comprised of:

• A) a loss of consumer surplus only
• B) a loss of consumer surplus and a loss of producer surplus
• C) a loss of private surplus
• D) a loss of producer surplus only

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Definitions:

Price-Earnings Ratio

A valuation ratio comparing a company’s current share price to its per-share earnings, helping investors evaluate if a stock is over or under-valued.

Net Profit Margin

A financial ratio that shows the percentage of net income generated from total revenue.

Gross Margin

The difference between sales revenue and the cost of goods sold, representing the profitability before deducting operating expenses.

Return On Total Assets

A financial ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets.