Question

hp ties its printer ink to its printers by embedding a patented printer head in its ink cartridge rather than build it into the printer. this raises the cost of producing the ink cartridge. if the government passed a law requiring hp ink to be used with hp printers, would this law increase or decrease deadweight loss?

Answer 1

If the government passed a law requiring HP ink to be used with HP printers, this law would decrease deadweight loss.

Deadweight loss refers to the difference in consumption and production of a service or product including government tax. It refers to the inefficiency of the market when supply and demand are out of equilibrium. Deadweight loss occurs due to ill management in the allocation of resources.

Other interventions such as price floors, price ceilings, taxation, and price controls can also result in deadweight loss. In the given situation, the cost of the production of ink cartridges will rise, but it will not add up to the deadweight loss because demand will also increase.

After the government's law, the demand for ink cartridges and HP printers will also increase, therefore a decrease in deadweight loss.

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