📚 Learning Guide
Graphing Deadweight Loss
easy

If a market for copper production is operating at a quantity above the socially efficient equilibrium, what is the primary cause of the deadweight loss observed in this scenario?

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Choose the Best Answer

A

The market is producing too much copper due to negative externalities.

B

Consumers are demanding more copper than is socially optimal.

C

The supply curve has shifted to the left, increasing prices.

D

Government regulations are limiting copper production.

Understanding the Answer

Let's break down why this is correct

Answer

When a market for copper production operates at a quantity above the socially efficient equilibrium, it means that more copper is being produced than is actually needed for society. This overproduction leads to deadweight loss because the costs of producing that extra copper exceed the benefits that consumers receive from it. Essentially, resources are being wasted on producing copper that people do not value as much as it costs to make. For example, if a factory produces too much copper, the extra copper might sit unused, leading to wasted materials and labor, which could have been better used elsewhere. Thus, the primary cause of deadweight loss in this scenario is the imbalance between the cost of production and the actual value to consumers.

Detailed Explanation

The market is making too much copper. Other options are incorrect because This answer suggests that consumers want more copper than is good for everyone; This option says the supply curve shifted left, which means less copper is available.

Key Concepts

Deadweight Loss
Negative Externalities
Socially Efficient Equilibrium
Topic

Graphing Deadweight Loss

Difficulty

easy level question

Cognitive Level

understand

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