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 area ____ disappears.

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 area ____ disappears.

Quizplus · Accepted Answer

If the market price falls from P₁ to P₂, then there is a decrease in consumer surplus (area BE), but an increase in producer surplus (area EF). However, there is also a deadweight loss (area FG) that represents the loss of efficiency in the market. Only area BEF disappears, as it is the overlap between the decrease in consumer surplus and the deadweight loss. Thus, the correct choice is D.