When a firm sets prices above the equilibrium level, it leads to _____, which indicates a loss in total welfare and a move away from allocative efficiency.

When a firm sets prices above the equilibrium level, it creates a situation called deadweight loss. This happens because fewer people can afford the product at the higher price, leading to less buying and selling than what would occur at equilibrium. As a result, some consumers who value the product more than its cost cannot purchase it, and some producers are unable to sell all they could at a lower price. This reduction in transactions means that the overall welfare in the economy decreases, as not all potential gains from trade are realized. For example, if a company sells a toy for $20 instead of the equilibrium price of $15, some parents might decide not to buy it, resulting in fewer toys sold and less happiness for both the parents and the toy maker.