An eﬃciency loss (or deadweight loss)
A) is measured as the combined loss of consumer surplus and producer surplus from over- or underproducing.
B) results from producing a unit of output for which the maximum willingness to pay exceeds the minimum acceptable price.
C) can result from underproduction, but not from overproduction.
D) can result from overproduction, but not from underproduction.

Question

Quizplus · Accepted Answer

An efficiency loss, also known as a deadweight loss, is measured as the combined loss of consumer and producer surplus when the equilibrium quantity and price of a good or service deviates from the optimal level. This can result from both overproduction and underproduction, as either case will cause a deviation from the optimal level of production. Choice B is incorrect because it describes a situation where there is a surplus, not a deadweight loss. Choices C and D are both incorrect because an efficiency loss can result from either over or underproduction.

An Eﬃciency Loss (Or Deadweight Loss)