Deadweight loss occurs when

Question

Quizplus · Accepted Answer

Deadweight loss occurs when there is a loss of economic efficiency due to a market distortion, such as a tax or a subsidy. In this situation, the government intervention leads to surplus losses for one group (e.g. producers or consumers) that are not fully offset by surplus gains for another group. This results in a net loss of surplus and a decrease in total welfare. Therefore, option B is the best choice that accurately describes deadweight loss. Options A, C, and D are incorrect as they do not fully capture the concept of deadweight loss.

Deadweight Loss Occurs When