A deadweight loss of consumer and/or producer surplus occurs when
A)producers fail to maximize profits.
B)mutually beneficial transactions cannot be completed.
C)consumers do not maximize their utility.
D)the price of inputs increases.

Question

Quizplus · Accepted Answer

Deadweight loss occurs when mutually beneficial transactions cannot be completed, often due to market inefficiencies such as price floors or ceilings, taxes or subsidies, or externalities. This results in a loss of both consumer and producer surplus, and a reduction in overall economic efficiency. The other choices do not accurately describe the circumstances that lead to deadweight loss.

A Deadweight Loss of Consumer And/or Producer Surplus Occurs When