Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased consumer surplus
B
Decreased quantity traded
C
Increased producer surplus
D
Perfect competition
Understanding the Answer
Let's break down why this is correct
Answer
When the price in a market is set above the equilibrium price, it can lead to a situation called deadweight loss. This happens because fewer people are willing or able to buy the product at the higher price, which means that some potential trades that would have benefited both buyers and sellers do not occur. For example, imagine a popular toy that is usually sold for $10 but is priced at $15. Some parents who would have bought the toy at $10 decide not to buy it at $15, leading to fewer sales and a loss of economic efficiency. As a result, the market does not reach its full potential, and both consumer and producer surplus are reduced, creating a loss for the overall economy.
Detailed Explanation
When the price is too high, fewer people buy the product. Other options are incorrect because Some might think higher prices help consumers; It's a common belief that higher prices always help sellers.
Key Concepts
deadweight loss
Topic
Deadweight Loss in Pricing
Difficulty
easy level question
Cognitive Level
understand
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