<P> A deadweight loss, also known as excess burden or allocative inefficiency, is a loss of economic efficiency that can occur when equilibrium for a good or a service is not achieved . That can be caused by monopoly pricing in the case of artificial scarcity, an externality, a tax or subsidy, or a binding price ceiling or price floor such as a minimum wage . </P> <P> An example is a market for nails where the cost of each nail is $0.10 and the demand decreases linearly, from a high demand for free nails to zero demand for nails at $1.10 . If the market has perfect competition, producers would have to charge a price of $0.10, and every customer whose marginal benefit exceeds $0.10 cents would have a nail . However, if there is one producer with a monopoly on the product, it will charge whatever price will yield the greatest profit . The producer would then charge $0.60 cents and thus exclude every customer who had less than $0.60 of marginal benefit . The deadweight loss would then be the economic benefit foregone by such customers because of monopoly pricing . </P>

The deadweight loss from a tax is called the