Deadweight loss

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Intros
Lessons
  1. Deadweight Loss Overview:
  2. Market Failure
    • Definition of Deadweight Loss
    • Market Failure
    • Overproduction
    • Underproduction
    • An Example
  3. Sources of Market Failure/Deadweight Loss
    • Price & Quantity Control
    • Taxes & Subsidies
    • Externalities
    • Public Goods
    • Common Resources
    • Monopoly
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Examples
Lessons
  1. Calculating Deadweight Loss
    You have the following information:

    Price (dollars per orange)

    Quantity demanded (oranges per day)

    Quantity supplied (oranges per day)

    0

    40

    0

    1

    30

    5

    2

    20

    10

    3

    10

    15

    4

    0

    20


    Suppose the government limits the production of oranges per day to 10.
    1. What is the maximum price that consumers are willing to pay for the 10th orange?
    2. What is the minimum price that producers are willing to pay for the 10th orange?
    3. Is there an underproduction or overproduction in the market?
  2. You have the following information:

    Price (dollars per orange)

    Quantity demanded (oranges per day)

    Quantity supplied (oranges per day)

    0

    40

    0

    1

    30

    10

    2

    20

    20

    3

    10

    30

    4

    0

    40


    Suppose the government limits the production of oranges by 10. Find the deadweight loss.
    1. Understanding Source of Market Failures
      State which of the following will result in an underproduction, and which will result in an overproduction.
      1. Price & Quantity Control
      2. Taxes
      3. Subsidies
      4. Positive Externalities
      5. Negative Externalities
      6. Monopoly
    2. Due to the exponential growth of the population in planet Earth, more people are using resources such as water, land, air and food. This is an example of _______________.
      1. Public Good
      2. Externality
      3. Common Resource
      4. Monopoly