-Using the above figure, which of the following quantities of CDs has the largest deadweight loss?
A) 7 million CDs
B) 3 million CDs
C) 4 million CDs
D) The deadweight losses associated with the three quantities given above are all equal.

Question

-Using the above figure, which of the following quantities of CDs has the largest deadweight loss?
A) 7 million CDs 
B) 3 million CDs 
C) 4 million CDs 
D) The deadweight losses associated with the three quantities given above are all equal.

Quizplus · Accepted Answer

The deadweight loss is largest when the quantity is furthest from the equilibrium quantity. Assuming the equilibrium quantity is not given, 7 million CDs would likely be furthest from equilibrium compared to 3 or 4 million CDs, thus having the largest deadweight loss.

-Using the Above Figure, Which of the Following Quantities of CDs