Deadweight loss measures the

Question

Quizplus · Accepted Answer

Deadweight loss is the loss of total surplus in the market due to market inefficiency. It occurs when the quantity of a good traded is below or above the socially optimal level. Deadweight loss can also occur due to government intervention, such as taxes, which can reduce the quantity of the good traded, leading to a reduction in the gains from trade for both buyers and sellers. The loss to buyers and sellers is not offset by an increase in government revenue, leading to a net loss to society. Therefore, option A is the correct answer.

Deadweight Loss Measures the