QuestionAugust 10, 2025

The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss. True False

The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss. True False
The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss.
True
False

Solution
3.5(179 votes)

Answer

True Explanation 1. Define Deadweight Loss Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achieved. 2. Relate Price Ceilings to Deadweight Loss Price ceilings can lead to a deadweight loss by causing shortages and reducing total surplus (sum of producer and consumer surplus).

Explanation

1. Define Deadweight Loss<br /> Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achieved.<br /><br />2. Relate Price Ceilings to Deadweight Loss<br /> Price ceilings can lead to a deadweight loss by causing shortages and reducing total surplus (sum of producer and consumer surplus).
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