The Two Deadweight Triangles Are the Consumption Distortion and Production

question 69

Essay

The two deadweight triangles are the Consumption distortion and Production distortion losses. It is easy to understand why the Consumption distortion constitutes a loss for society. After all, it raises the prices of goods to consumers, and even causes some consumers to drop out of the market altogether. It seems paradoxical that the Production distortion is considered an equivalent burden on society. After all, in this case, profits increase, and additional production (with its associated employment) comes on line. This would seem to be an offset rather than an addition to the burden or loss borne by society. Explain why the Production distortion is indeed a loss to society, and what is wrong with the logic that leads to the apparent paradox.

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Definitions:

Atomic Sentences

Simple sentences that cannot be broken down into smaller independent parts, typically used to express basic propositions in logic.

Truth Values

Binary labels (true or false) assigned to statements in logic to denote their veracity.

Truth Table

A table used in logic to determine the truthfulness of various combinations of propositions.

Atomic Sentences

The simplest kind of sentences in logic that cannot be broken down into smaller parts, representing basic facts or assertions.