-Refer to the figure above. If market price of sunglasses is $50, all of the following are true except which one?

Question

Quizplus · Accepted Answer

When the market price of sunglasses is $50, it indicates that the market is in equilibrium where the quantity supplied equals the quantity demanded. This equilibrium point is where the marginal cost to society equals the marginal benefit, ensuring that the efficient quantity is produced and total surplus is maximized. Deadweight loss occurs when there is a deviation from this equilibrium, typically due to market distortions like taxes, subsidies, or price controls, which is not indicated in this scenario. Therefore, the statement that area B represents the deadweight loss is incorrect without further context suggesting a deviation from equilibrium.

-Refer to the Figure Above