Consider Good A.  There are NO externalities associated with Good A.   a.)  Draw a ( general- you don’t need any specific numbers) graph that shows the deadweight loss that would result if a tax is placed on Good A.       b.) Suppose that, after the tax is placed on Good A, the quantity consumed ( by all customers) is equal to 90,000  units of Good A. Is the efficient level of output in the market for Good A greater than 90,000 , less than 90,000 , or equal to 90,000 ( just circle your answer ; you don’t have to explain)? (7) The efficient level is greater than 90,000     The efficient level is less than 90,000     The efficient level is equal to 90,000

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.