The diagram below shows the demand and supply curves in a perfectly competitive market. FIGURE 12-5
-Refer to Figure 12-5.If output in this market were Q_3,the loss in total economic surplus relative to the competitive equilibrium would be illustrated by area

Question

The diagram below shows the demand and supply curves in a perfectly competitive market.

FIGURE 12-5
-Refer to Figure 12-5.If output in this market were Q_3,the loss in total economic surplus relative to the competitive equilibrium would be illustrated by area

Quizplus · Accepted Answer

When output is less than the competitive equilibrium (Q3), there is a deadweight loss represented by the area between the demand and supply curves from the reduced output level to the equilibrium output. This loss is typically shown as the sum of areas 3 and 4.

The Diagram Below Shows the Demand and Supply Curves in a Perfectly