One measure of the extent of market inefficiency is
A)how far market price deviates from equilibrium.
B)how far quantity exchanged deviates from equilibrium.
C)the size of the economic surplus.
D)the size of the deadweight loss.
E)the difference between total economic surplus and deadweight loss.

Question

Quizplus · Accepted Answer

Deadweight loss measures the efficiency loss that occurs when the quantity of a good traded in a market is lower than the equilibrium quantity. It is a direct result of market inefficiency due to factors like taxes, subsidies, price floors or ceilings, etc. The larger the deadweight loss, the greater the extent of market inefficiency. Therefore, D is the correct answer.

One Measure of the Extent of Market Inefficiency Is