A local coffee shop has a monopoly in its neighborhood and decides to raise the price of coffee above the market equilibrium level to maximize profits. As a result, fewer customers buy coffee, and some customers switch to making coffee at home. What is the most likely outcome of this pricing strategy in terms of market efficiency and consumer welfare?

When the coffee shop raises its prices above the market equilibrium, it creates a situation where fewer customers are willing to buy coffee. This means that some people who would have bought coffee at the lower price now choose to make it at home instead. As a result, the coffee shop sells less coffee than it would have at a lower price, leading to a loss of potential sales. This situation causes deadweight loss, which is a measure of the economic inefficiency that occurs when the quantity of a good traded is less than what would be traded in a competitive market. Ultimately, this pricing strategy harms consumer welfare because fewer customers can enjoy coffee at an affordable price, and the overall market becomes less efficient.