Deadweight Loss Is

question 245

Multiple Choice

Deadweight loss is:

• A) necessary to ensure that resources are channeled to their highest-valued use.
• B) the loss to the economy from firms going out of business due to competition.
• C) usually offset by deadweight gains.
• D) the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited.

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Definitions:

Perfectly Competitive Firm

A business operating in a market where no single firm can influence the market price or market conditions, facing many competitors and selling identical products.

Long Run

A period sufficient for all inputs to production, including capital, to be varied.

Long Run

A period of time sufficient for all markets to adjust to changes, including the reallocation of resources and entrance or exit of firms in an industry.

Perfectly Competitive Industries

Markets where no single buyer or seller has the power to influence prices, and where products are homogeneous and information is freely available.