Use the following to answer questions:
Figure: Paint Market 2
-(Figure: Paint Market 2) If the fixed costs were halved, deadweight loss would:
A) double.
B) be halved.
C) be reduced to zero.
D) not change.

Question

Use the following to answer questions:
Figure: Paint Market 2 
-(Figure: Paint Market 2) If the fixed costs were halved, deadweight loss would:
A) double. 
B) be halved. 
C) be reduced to zero. 
D) not change.

Quizplus · Accepted Answer

Deadweight loss is related to the inefficiency in the market, not the level of fixed costs. Halving fixed costs does not affect the quantity produced or the price, so deadweight loss remains unchanged.

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