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Question
Microeconomics
Posted 2 months ago

What area(s) represent deadweight loss that occurs because some buyers can no longer buy this good?

Choose 1 answer:
(A) HH
(B) KK
(C) GG
(D) II
(E) LL
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Answer from Sia
Posted 2 months ago
Solution
a
Definition of Deadweight Loss: Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium outcome is not achieved. It represents the total surplus lost to society due to market distortions such as price controls
b
Identifying Deadweight Loss: On a supply and demand graph, deadweight loss is typically represented by the area between the supply and demand curves that is not realized due to the price control
c
Analyzing the Graph: In the given graph, the price control is set at P4P4, which is above the equilibrium price. This creates a surplus, as the quantity supplied (Q2Q2) exceeds the quantity demanded (Q1Q1). The deadweight loss is the area between the supply and demand curves from Q1Q1 to Q2Q2
d
Calculating Deadweight Loss: The deadweight loss is represented by the area of the triangle formed by points II, HH, and KK. This area is not realized in the market due to the price control
Answer
(B) KK
Key Concept
Deadweight loss occurs when market equilibrium is not achieved due to price controls, resulting in a loss of total surplus.
Explanation
In the given graph, the deadweight loss is represented by the area of the triangle formed by points II, HH, and KK, which is the area between the supply and demand curves from Q1Q1 to Q2Q2.

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