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Siona Vartanian
on Oct 26, 2024

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Programs associated with the welfare state are believed to cause deadweight loss since they:

A) affect the amount of disposable income that households below the poverty line have to spend.
B) affect incentives to work and to save.
C) are supported by many political parties.
D) are based on the ability-to-pay principle.

Deadweight Loss

Deadweight loss is the decrease in total surplus (both consumer and producer surplus) that occurs when a market is not in perfect competition, typically due to inefficiencies like taxes, subsidies, or monopolies.

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been accounted for.

Poverty Line

A threshold set by governments to define the minimum income level necessary to afford basic necessities, delineating who is considered to be in poverty.

  • Analyze the economic implications of welfare programs, including their effects on work incentives and deadweight loss.
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Christina SimpsonNov 02, 2024
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