Deadweight losses occur when the quantity of an output produced is:

Deadweight losses occur when the quantity of an output produced is:

A) greater than, but not when it is less than, the competitive equilibrium quantity.

B) less than or greater than the competitive equilibrium quantity.

C) such that the marginal benefit of the output is just equal to the marginal cost

Answer: B) less than or greater than the competitive equilibrium quantity.

Deadweight loss is defined as the amount of economic surplus and social welfare which is actually lost due to the discrepancy in the quantity of an output produced and the levels in a competitive model. ’Competitive equilibrium’ quantity is the point at which the demand and supply curve meet hence it is the most efficient amount of the commodity in the market.

The occurrence of a quantity produced either below or above the competitive equilibrium quantity leads to a deadweight loss. This loss emerges since the total benefits offered by these resources are not optimally consumed hence presenting a condition in which the entire society benefit is less than the deserved level.

Option A is wrong because deadweight losses are accrued when the quantity produced is less as compared to the competitive quantity as well.

Option C is irrelevant because it is used in the efficient output or total output where condition is reached when deadweight loss is either non-existent or at minimum.

In conclusion, deadweight losses happen when the quantity of an output differs with the competitive quantity or it is produced in either surplus or deficiency thus distorting the accomplishments of productive efficiency and the improvement of social welfare.