Figure 8-2

-Refer to Figure 8-2.The amount of deadweight loss associated with the tax is equal to
A)P₃ A C P₁.
B)A B C.
C)P₂ A D P₃.
D)P₁ D C P₂.

Question

Figure 8-2
 
-Refer to Figure 8-2.The amount of deadweight loss associated with the tax is equal to
A)P₃ A C P₁. 
B)A B C. 
C)P₂ A D P₃. 
D)P₁ D C P₂.

Quizplus · Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved. In this case, the optimal quantity traded is at point A, where the supply and demand curves intersect, but with the introduction of the tax, the equilibrium shifts to point C, resulting in a deadweight loss that is represented by the area of triangle A B C.

Figure 8-2 -Refer to Figure 8-2.The Amount of Deadweight Loss Associated with Deadweight