Which of the following generate deadweight losses to consumers and firms?
A)the efficient transfer mechanism
B)the market for superstars
C)minimum wages
D)rent control but not taxes

Question

Quizplus · Accepted Answer

Minimum wages create a deadweight loss to both consumers and firms by creating a surplus of labor, resulting in unemployment and decreased business profitability. Option A, the efficient transfer mechanism, is not associated with deadweight losses as it is designed to transfer resources efficiently. Option B, the market for superstars, is not necessarily tied to deadweight losses, as it refers to the tendency for a few individuals in certain industries (such as sports or entertainment) to earn significantly higher incomes than others. Option D, rent control but not taxes, is incorrect as rent control also results in deadweight losses by reducing the quantity and quality of available housing.

Which of the Following Generate Deadweight Losses to Consumers and Firms