-In the above figure, suppose the government subsidizes the production of milk so that milk production increases to 8 million gallons per day. What is the size of the deadweight loss? (Hint: It is equal to the triangular area of negative consumer and producer surplus that results when output exceeds the efficient level.)
A) $12.5 million
B) $6.25 million
C) $4.50 million
D) $2.25 million

Question

-In the above figure, suppose the government subsidizes the production of milk so that milk production increases to 8 million gallons per day. What is the size of the deadweight loss? (Hint: It is equal to the triangular area of negative consumer and producer surplus that results when output exceeds the efficient level.)
A) $12.5 million 
B) $6.25 million 
C) $4.50 million 
D) $2.25 million

Quizplus · Accepted Answer

The deadweight loss is calculated as the area of the triangle formed by the overproduction of milk beyond the efficient level. Given the options, $2.25 million represents the correct calculation of this triangular area of negative surplus.

-In the Above Figure, Suppose the Government Subsidizes the Production