Economist Harvey Leibenstein argued that the loss of economic efficiency in industries that are not perfectly competitive has been understated. He argued that when competition is weak, firms are under less pressure to adopt the best techniques or to hold down their costs. He referred to this effect as "x-inefficiency." If x-inefficiency causes a firm's marginal costs to rise, use a graph to show that the deadweight loss in Figure 15.5 understates the true deadweight loss caused by a monopoly.

Figure 15.5

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Price and cost мC Transfer of consumer surplus to monopoly PM Deadweight loss from Pc monopoly (B + C) MСм Marginal cost of the last unit produced by the monopoly Demand MR Ом Qc Quantity