Deadweight loss occurs when:
A) consumer surplus transforms into producer surplus.
B) there is a shortage of a good or service.
C) consumer and/or producer surplus decrease without the surplus going to anyone.
D) the gains from trade are lowered due to shifts in the supply or demand curve.

Question

Quizplus · Accepted Answer

Deadweight loss refers to the reduction in economic efficiency that occurs when the equilibrium for a good or service is not achieved, resulting in a net loss of consumer and/or producer surplus without anyone else gaining. This can happen due to price controls, taxes, subsidies, or other market distortions that lead to inefficient production and consumption. Therefore, option C is the correct answer as it reflects the loss of welfare that is not transferred to anyone else.

Deadweight Loss Occurs When