The following figure shows the private cost and social cost of producing Good X.

-Refer to the figure above.What does the region EFG represent?
A) Consumer surplus
B) Producer surplus
C) Deadweight loss
D) Economic profit

Question

The following figure shows the private cost and social cost of producing Good X.
 
-Refer to the figure above.What does the region EFG represent?
A) Consumer surplus 
B) Producer surplus 
C) Deadweight loss 
D) Economic profit

Quizplus · Accepted Answer

Region EFG represents the deadweight loss, which is the loss of economic efficiency that occurs when the equilibrium for a good or service is not optimal. In this case, the market is producing less than the socially optimal level of Good X, resulting in a loss of welfare for both producers and consumers. To maximize economic efficiency, the market should produce the quantity where the social cost equals the social benefit (where MSC = MSB).

The Following Figure Shows the Private Cost and Social Cost