Deadweight loss
A)is a problem only when more than the equilibrium quantity is produced.
B)is a loss of producer and consumer surplus.
C)is a problem only when less than the equilibrium quantity is produced.
D)occurs when Pareto efficiency is achieved.
E)is typically an example of market failure.

Question

Quizplus · Accepted Answer

Deadweight loss is a loss of both producer and consumer surplus that occurs when the quantity produced and consumed is not at the efficient equilibrium level. This is typically seen as a market failure. Option A and C are incorrect because deadweight loss occurs even at the equilibrium quantity if there are external costs or benefits. Option D is incorrect because Pareto efficiency leads to no deadweight loss.

Deadweight Loss