Option 2: Improving Equilibrium Outcomes When a market is competitive and functioning properly, economic theory predicts that the market equilibrium will be efficient. However, this may not always be the desired outcome. Market outcomes may be unequal or distorted by market failure. What effect will this solution have on consumer surplus, producer surplus, social surplus, and deadweight loss? Explain.
Option 2: Improving Equilibrium Outcomes
When a market is competitive and functioning properly, economic theory predicts that the
What effect will this solution have on
Generally , the socially optimal output is achieved when demand and supply are equated. And this lead to determination of price and quantity but at the market failure doesn't allow this . Here the market failure is due to Externality ( negative externalities) which doesn't allow to produce the optimal level of output at market equilibrium price.
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