Suppose The Louvre owns a piece of art that generates a value of $2 million to the viewers who visit the museum, and suppose the same piece of art could generate a value of $3.5 million to the visitors of The Metropolitan Museum of Art if it were instead placed there.

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BlackTom AI · Accepted Answer

Consider the scenario described: the artwork, if placed at The Louvre, yields value 2 million to viewers; if instead placed at The Metropolitan Museum of Art, it would yield 3.5 million to viewers. 
Option A: It claims an inefficient outcome with a deadweight loss of 3.5 million. This is misleading because the potential gain from moving the artwork to the Met is the difference between the two valuations, which is 3.5 − 2 = 1.5 million. The proposed deadweight loss of 3.5 million would imply a much larger misallocation than the numbers indicate, so this option misstates the magnitude and the source of any deadweight loss.

Option B: An inefficient outcome with a deadweight loss of 1.5 million. Here, the logic is that the current allocation (art at Louvre) does not maximize total value, since moving it to the Met would increase total value by 1.5 million. The term “deadweight loss” reflects the forgone surplus from not achieving the higher-valued placement, which matches the 1.5 million gap between 3.5 and 2.0. This aligns with standard efficiency reasoning where the best use is at the location that yields the highest value.

Option C: This claims an efficient outcome with a surplus of 1.5 million. Given that the alternative placement would raise total value by 1.5 million, stating the current situation is already efficient contradicts the clear gain from reallocation. Therefore, this choice mislabels the efficiency and ignores the potential surplus from moving to the Met.

Option D: An efficient outcome with a surplus of 2 million. This option similarly asserts efficiency and assigns a surplus that does not correspond to the numbers: there is no discrete surplus of 2 million from the current choice, since the relevant comparison is the 1.5 million gain from relocating to the Met, not 2 million. Thus this option is incorrect both in efficiency assessment and in the magnitude of surplus.

In summary, comparing the two valuations (2 million vs 3.5 million) shows an opportunity to increase total value by 1.5 million by relocating the artwork to the Met, which characterizes an inefficient outcome with a deadweight loss of 1.5 million. The other options either overstate the deadweight loss or misclassify the situation as efficient with incorrect surplus figures.

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Suppose The Louvre owns a piece of art that generates a value of $2 million to the viewers who visit the museum, and suppose the same piece of art could generate a value of $3.5 million to the visitors of The Metropolitan Museum of Art if it were instead placed there.

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