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Economics

Monopoly Pricing and Deadweight Loss

Quick fact

A monopolist's profit-maximizing price is always above marginal cost, but it is not the maximum price consumers would pay; it's the price that balances losing customers with earning more per sale.

Why this is interesting

You might think a monopoly charges the highest possible price—but that's not true. The actual price is lower than that, yet it still leaves society worse off. Why?