Deadweight Loss

A loss of consumer or producer surplus that is not transferred to any other party and that represents a decline in economic efficiency.

For example, consider a market for t-shirts where the cost of each t-shirt is US$1 and the demand will decrease linearly from a high demand for free t-shirts to zero demand for t-shirts at US$10. In a perfectly competitive market, producers would have to charge a price of US$1 and every customer whose marginal benefit exceeds US$1 would have a t-shirt. However if there is one producer who has a monopoly on the product, then they will charge whatever price will yield the greatest profit. For this market, the producer would charge US$2 and thus exclude every customer who had less than US$2 of marginal benefit. The deadweight loss is then the economic benefit foregone by these customers due to the monopoly pricing.