Figure 7.20: Deadweight Loss from Profit Maximization for Beautiful Cars
Figure 7.20 displays the deadweight loss that arises from the firm's choice to maximize profits at point E (32 cars) instead of producing at the Pareto-efficient level of point F (64 cars). This loss of total surplus is visually represented by the shaded triangular area. The area is bounded by the demand curve and the marginal cost curve for the quantities between 32 and 64, quantifying the potential gains from trade that are not realized due to the firm's pricing strategy.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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Figure 7.20: Deadweight Loss from Profit Maximization for Beautiful Cars
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