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

In this scenario, we compare the total value generated by placing the art at two different museums.
- If the Louvre keeps the piece, the value to visitors is 2 million. This represents the total benefit in that location.
- If the piece were placed at The Metropolitan Museum of Art, the value to visitors would be 3.5 million. This is higher, meaning there is an additional 1.5 million of value available if the piece is moved.
From an efficiency standpoint, we want to maximize total societal value. Moving the art to the Met increases total value by 3.5 − 2 = 1.5 million, so not moving it to the Met leads to a lost opportunity or a deadweight loss of 1.5 million.
Option 1: 'This is an inefficient outcome, with a deadweight loss of $1.5 million' correctly captures that keeping the art at the Louvre foregoes 1.5 million of potential value.
Option 2: 'This is an inefficient outcome with a deadweight loss of $3.5 million' wrongly attributes the entire 3.5 million difference as deadweight loss rather than the incremental 1.5 million, misrepresenting the opportunity cost.
Option 3: 'This is an efficient outcome, with a surplus of $2 million' incorrectly treats the 2 million value at Louvre as an efficiency surplus and ignores the higher value available at the Met.
Option 4: 'This is an efficient outcome, with a surplus of $1.5 million' mislabels the situation as efficient and uses the wrong framing of the 1.5 million figure, which is the opportunity cost of not moving the art to the Met, not a surplus.
Thus, evaluating all options against the comparison of 2 million vs 3.5 million shows that only the first statement accurately reflects the deadweight loss from sticking with the Louvre location.

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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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