Deadweight loss measures the loss
a. in a market to buyers and sellers that is not offset by an increase in government revenue.
b. in revenue to the government when buyers choose to buy less of the product because of the tax.
c. of equality in a market due to government intervention.
d. of total revenue to business firms due to the price wedge caused by the tax.
a
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Refer to Figure 4-7 which shows the market for watermelons. Suppose the government imposes a price floor of Pw. How will the price floor affect the quantity supplied, quantity demanded, and quantity exchanged?
What will be an ideal response?
A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is
A) earning economic profits. B) experiencing economic losses. C) experiencing zero profits. D) in a position in which it should shut down.