The net cost to society from prohibiting the operation of a competitive market in equilibrium is
A)lost consumer surplus only.
B)lost producer surplus only.
C)lost producer profits only.
D)a deadweight loss.

Question

Quizplus · Accepted Answer

Prohibiting the operation of a competitive market in equilibrium creates a deadweight loss, which is the loss of both producer and consumer surplus that occurs when the quantity of a good produced is less than the socially optimal level. This represents a net cost to society because some individuals are prevented from making mutually beneficial exchanges that would have occurred in a competitive market. The other options (A, B, and C) do not capture the full extent of the costs associated with market intervention.

The Net Cost to Society from Prohibiting the Operation of a Competitive