Question

The social costs of imperfect competition are known as:

a. Producer surplus
b. Consumer surplus
c. Dead-weight loss
d. None of the above

Answer 1

The social costs of imperfect competition are known as deadweight loss. It is the loss in social surplus that occurs when the economy produces at an inefficient quantity. When deadweight loss exists, it is possible for both consumer and producer surplus to be higher.

Step-by-step explanation:

The social costs of imperfect competition are known as deadweight loss. Deadweight loss is the loss in social surplus that occurs when the economy produces at an inefficient quantity. It is like money thrown away that benefits no one. When deadweight loss exists, it is possible for both consumer and producer surplus to be higher, in this case because the price control is blocking some suppliers and demanders from transactions they would both be willing to make.