Deadweight loss occurs when the government imposes a tax on consumers, or businesses thus shifting the supply curve to the left and therefor reducing output, raising prices, and incurring a loss. As the graph above shows both consumers, and producers lose out when a tax is imposed, or monopoly pricing chooses to increase cost. A result of deadweight loss is decreased allocative, and productive efficiency. Overall it’s very bad to have deadweight loss, and it should be avoided at all cost.
When a monopolistic firm or any type of firm for that matter can no longer afford to satisfy it’s AVC then it should shutdown because even if they can’t completely fufill their Average fixed cost they can hope to make some profit and start to pay off their average fixed cost, and they can hope to expand so as to obtain economies of scale, while leaving diseconomies of scale. Finally if firm can no longer satisfy the lowest level of average total then they should be in the shutdown phase because they can no longer afford to pay off anything, and they sure as hell aren’t satisfying the lowest portion of Average Total Cost.
Monopolies cannot charge whatever they want for a product because the higher the price the less of a good will be demanded. A monopoly will try to profit maximize which is there goal so they will price there good where MR = MC interesects the ATC curve. The reason that they cannot a price at whatever price they choose is because they will loose money as the amount quantity demanded begins to fall in which marginal revenue begins to diminish and ATC starts becoming more than marginal revenue.