What happens in a market distortion?

In a market distortion, the typical conditions of supply and demand are altered, which can lead to inefficiencies in the market. One significant outcome of such distortions is the emergence of deadweight loss. This occurs when the quantity of a good being bought and sold is not at the level that maximizes total surplus within the economy. Total surplus is the combination of consumer surplus and producer surplus, which represents the overall benefit to society from the consumption and production of a good.

When market distortions like taxes, subsidies, price controls, or other forms of interventions occur, they can interfere with the natural equilibrium of supply and demand. As a result, the quantity traded may decrease or increase away from the efficient market level, leading to mismatches between what consumers are willing to pay and what producers are willing to accept.

Thus, the presence of deadweight loss is a clear indicator of market distortion, highlighting the efficiency losses that occur when the market is not able to reach equilibrium. This makes it evident why the correct answer focuses on deadweight loss as a consequence of market distortions.