Question

Question 40 (1 point) When there is deadweight loss created by the market itself, economist say there is: socialism O market failure excess total surplus too much producer surplus

Answer 1

Answer ) option b - market failure

Deadweight loss is created due to monopoly pricing,it is that lost gains that did not go to either the producer nor to consumers . In a perfectly competitive market there is no desdweight loss but in a monopoly ,price is charged much above the marginal cost that creates a deadweight loss in the market causing market inefficiency , which according to economists is a market failure.

The monopoly pricing creates a deadweight loss because the firm forgoes transactions with the consumers. The deadweight loss is the potential gains that did not go to the producer or the consumer. As a result of the deadweight loss, the combined surplus (wealth) of the monopoly and the consumers is less than that obtained by consumers in a competitive market. A monopoly is less efficient in total gains from trade than a competitive market.