When there is market failure so that a market produces less than the efficient amount,
A) consumer surplus definitely is larger than when the efficient quantity is produced.
B) the sum of producer surplus and consumer surplus is larger than when the efficient quantity is produced.
C) there is a deadweight loss.
D) consumers definitely lose and producers definitely gain.
E) consumers definitely gain and producers definitely lose.

Question

Quizplus · Accepted Answer

When there is market failure and the market produces less than the efficient amount, there is a deadweight loss. This means that society as a whole is worse off than it would be if the market produced at the efficient quantity. Both consumer surplus and producer surplus are lower than they would be at the efficient quantity, and there is a loss of economic welfare.

When There Is Market Failure So That a Market Produces