-When underproduction occurs,
A) there is a deadweight loss that is borne by the entire society.
B) consumer surplus increases to a harmful amount.
C) producers gain more surplus at the expense of consumers.
D) the deadweight loss harms only consumers.
E) marginal cost is greater than marginal benefit.

Question

-When underproduction occurs,
A) there is a deadweight loss that is borne by the entire society. 
B) consumer surplus increases to a harmful amount. 
C) producers gain more surplus at the expense of consumers. 
D) the deadweight loss harms only consumers. 
E) marginal cost is greater than marginal benefit.

Quizplus · Accepted Answer

Underproduction leads to a deadweight loss because the quantity produced is less than the socially optimal level, resulting in lost potential gains from trade that affect the entire society.

-When Underproduction Occurs