 In making this estimate, Harberger assumed that the extent of market power of the firms in an industry is reflected in the degree of above-normal profits in that industry.The efficiency loss from monopoly arises from the fact that high-profit industries produce too little output, and low-profit industries produce too much output.The net welfare cost is the sum of the gains that would be obtained if output were reallocated in such a way as to bring the rate of profit in each industry to the economy-wide average.