The Gunners were in dire need of a win to boost any chance of making it into a European spot.
They sit ninth in the Premier League and are now seven points behind the Reds, who executed the perfect game plan.
Arsenal were pedestrian but large swathes of the match, camped in their own half.
They lacked any creativity and had no idea what to do with the ball past the halfway line with Pierre-Emerick Aubameyang and Alexandre Lacazette anonymous.
And Arteta was furious with his side – admitting he was “in shock” at what he had just watched.
He told Sky Sports” “We completely deserved to lose the game.
“They were better in every department and deserved to win the game with the margin they had, or even more. I accept responsibility for the way we played today.
“They made the right decisions, we didn’t. It is my fault. I have to set the team up to perfom in a different way and that is it.
“Congratulations to Liverpool because they were exceptional today. That showed the difference between the two teams – that when they play at that level, the margin is incredibly high.
“I don’t have to use any excuses – that we don’t have five or six players – the standards are much higher at this football club and I have to get them to perform at that level.
“It was technical as well. We gave every ball away and could not put three passes together.
“The basics weren’t there today. If you do that against this kind of opponent, you get punished like we have.
“At the moment I am in shock. I didn’t expect that because of the way the team trained. It is a challenge.
“A challenge brings an opportunity. If you have courage and you represent a club like this, you have to stand up and take it.”