In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller
A)the greater the difference between marginal cost and price.
B)the smaller the difference between marginal cost and average total cost.
C)the smaller the difference between marginal cost and price.
D)the greater the difference between marginal cost and average revenue.

Question

Quizplus · Accepted Answer

Deadweight loss occurs when the price is greater than the marginal cost, so the smaller the difference between marginal cost and price, the smaller the deadweight loss. Option A is incorrect as it refers to the difference between marginal cost and price, which is actually the inverse of deadweight loss. Option B is incorrect as it refers to the difference between marginal cost and average total cost, which is not directly related to deadweight loss. Option D is incorrect as it refers to the difference between marginal cost and average revenue, which does not necessarily indicate economic efficiency.

In Evaluating the Degree of Economic Efficiency in a Market