The figure above shows the market for pizza.
-In the figure above,if pizza production is restricted to 5,000 pizzas a day,the deadweight loss is
A) $45,000 per day.
B) $12,500 per day.
C) $22,500 per day.
D) $90,000 per day.
E) zero.

Question

The figure above shows the market for pizza.
-In the figure above,if pizza production is restricted to 5,000 pizzas a day,the deadweight loss is
A) $45,000 per day. 
B) $12,500 per day. 
C) $22,500 per day. 
D) $90,000 per day. 
E) zero.

Quizplus · Accepted Answer

The deadweight loss is the area of the triangle between the supply curve, the demand curve, and the quantity produced at the new equilibrium point (when production is restricted to 5,000 pizzas a day). This triangle has a base of 5,000 pizzas (the difference between the quantity demanded and quantity supplied at the new equilibrium point) and a height of $4.50 (the difference between the equilibrium price and the minimum supply price). Therefore, the deadweight loss is (1/2) x 5,000 x $4.50 = $22,500 per day.

The Figure Above Shows the Market for Pizza