Asked by Bertrand Veronique on Jun 20, 2024
Verified
When there is underproduction in a market,
A) market price is too high.
B) there is excess quantity supplied.
C) the total of consumer and producer surplus is maximized.
D) there is a deadweight loss.
Consumer Surplus
The difference between the maximum price consumers are willing to pay and the actual price they pay.
Underproduction
A situation where the quantity produced of a good or service is less than the socially optimal level, often leading to market failure.
Market Price
The existing cost for acquiring or offloading an asset or service in the marketplace.
- Investigate the alterations in surplus and deadweight loss due to market underproduction or overproduction.
Verified Answer
MB
Michelle BagleyJun 23, 2024
Final Answer :
D
Explanation :
Underproduction in a market leads to a deadweight loss because the market is not operating at maximum efficiency, meaning not all mutually beneficial trades are being made. This results in a loss of total surplus.
Learning Objectives
- Investigate the alterations in surplus and deadweight loss due to market underproduction or overproduction.