monopoly: deadweight loss

http://en.wikipedia.org/wiki/Deadweight_loss

In economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal. In other words, either people who would have more marginal benefit than marginal cost are not buying the good or service, or people who would have more marginal cost than marginal benefit are buying the product.

For example, consider a market for nails where the cost of each nail is 10 cents and that the demand will decrease linearly from a high demand for free nails to zero demand for nails at $1.10. In a perfectly competitive market, producers would have to charge a price of 10 cents and every customer whose marginal benefit exceeds 10 cents would have a nail. However if only one producer has a monopoly on the product, then they will charge whichever price will yield the highest profit. For this market, the producer would charge 60 cents and thus exclude every customer who had less than 60 cents of marginal benefit. The deadweight loss is then the economic benefit forgone by these customers due to the monopoly pricing