Review Question 1 What is meant by deadweight​ loss? Why does a price ceiling usually result in a deadweight​ loss? Deadweight loss is a​ . A price ceiling results in a deadweight loss when the ceiling price is set​ the market clearing price. A. net loss in​ output; above B. net loss of consumer and producer​ surplus; below C. net loss in​ output; below D. net loss of consumer and producer​ surplus; above Click to select your answer and then click Check Answer. All parts showing

b

Explanation:

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.

Effects of a binding price ceiling

1.It leads to shortages

2.it leads to the development of black markets

3.it prevents producers from raising price beyond a certain price

4.It lowers the price consumers pay for a product.  

The dead weight loss is the reduction in total surplus as a result of price setting. When price is set below equilibrium price, less goods are produced and consumed. This leads to a reduction in consumer and producer surplus

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Producer surplus is the difference between the price of a good and the least price the seller is willing to sell the product

d. low interest rates