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The Ministry of Misallocation has decreed that the production of widgets must be 4000 each month and the production of gizmos must be 10000 each month. Calculate the deadweight loss in each market caused by these restrictions. Please note the scale of the quantity axis is in thousands.What is the deadweight loss in the gizmos market

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Answer:

10,000

Step-by-step explanation:

Given that :

Decreed production level by the ministry :

Monthly widget production = 4000

Monthly gizmos production = 10,000

Deadweight loss for gizmos :

0.5(p2 - p1) * (Q2 - Q1)

0.5(70 - 60) * (10000 - 8000)

0.5 * 10 * 2000

10,000

Hence, Deadweight loss on gizmos is 10000

Deadweight loss occurs when equilibrium output is not attained.

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