Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
-As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then:

Question

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss -As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then:

Quizplus · Accepted Answer

When the market price falls from P1 to P2, consumer surplus increases because consumers can now buy more of the good at a lower price. Producer surplus also increases because producers can now sell more of the good at a higher price. Deadweight loss is eliminated because the market is now operating at the efficient quantity, where the marginal benefit of the good is equal to the marginal cost of production.