Deadweight loss:
A) creates efficiency in markets when producers and consumers both agree to it.
B) is the difference between the total surplus occurring in a market and the maximum total surplus achievable.
C) is the loss in producer surplus from a price increase.
D) is the difference between the efficient quantity and the market quantity.

Question

Quizplus · Accepted Answer

Deadweight loss is the loss in total surplus that occurs due to inefficiencies in a market, such as taxes or price controls. It is the difference between the maximum achievable total surplus and the total surplus that actually occurs in the market. Option A is incorrect because deadweight loss is actually a result of inefficiency, not efficiency. Option C is also incorrect because deadweight loss is not solely a loss in producer surplus, but rather a loss in total surplus. Option D is partially correct in that deadweight loss is the difference between the efficient quantity and market quantity, but it does not fully capture the concept of total surplus and inefficiency.

Deadweight Loss