What is a deadweight loss?Question 5Select one:a.The financial cost of a deep and long-lasting economic recessionb.The cost to a firm when the creation of new goods makes an old product obsoletec.When the costs of a firm are higher than the profitsd.A loss in social welfare
Question
What is a deadweight loss?Question 5Select one:a.The financial cost of a deep and long-lasting economic recessionb.The cost to a firm when the creation of new goods makes an old product obsoletec.When the costs of a firm are higher than the profitsd.A loss in social welfare
Solution
A deadweight loss refers to the loss in social welfare. This typically occurs when a market is not in equilibrium, often due to factors such as monopolies, taxes, or subsidies. In these cases, the price of a good or service deviates from its equilibrium, leading to an inefficient allocation of resources and a loss in total surplus. This loss in total surplus, which is not recouped by any party in the market, is referred to as the deadweight loss. So, the correct answer is d. A loss in social welfare.
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