Pareto defined allocative efficiency as a situation where no one could be made better off without making someone else at least as worth off.
Under monopoly, a business can keep price above marginal cost and increase total revenue and profits as a result. Assuming that a monopolist and a competitive firm have the same costs, the welfare loss under monopoly is shown by a deadweight loss of consumer surplus compared to the competitive price and output. This is shown in the diagram below.
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