Tax Diagram Deadweight Loss. Non optimal production can be caused by monopoly pricing in the case of artificial scarcity a positive or negative externality a tax or subsidy or a binding price ceiling or price floor such as a minimum wage. Qc quantity provided in competitive market.
Another example is increasing the income tax rate. Graphically this is illustrated in the figure below where the tax wedge the deadweight loss is represented by the purple triangle. The above diagram illustrates the deadweight loss generated by a monopoly.
Qc quantity provided in competitive market.
1 2 p mc qc qm mc marginal cost. From this we can see that the dead weight loss monopoly formula is. But keep in mind. Qm quantity produced by a monopoly.
