When there is market failure so that a market produces less than the efficient amount,
A) there is a deadweight loss.
B) consumers definitely lose and producers definitely gain.
C) the sum of producer surplus and consumer surplus is larger than when the efficient quantity is produced.
D) consumers definitely gain and producers definitely lose.
E) consumer surplus definitely is larger than when the efficient quantity is produced.

Question

Quizplus · Accepted Answer

When a market produces less than the efficient amount, there is a deadweight loss, which represents the loss of potential gains from trade. Both consumers and producers may be worse off than if the market were producing the efficient quantity. There is no clear winner or loser in terms of consumer or producer surplus.

When There Is Market Failure So That a Market Produces