Asked by
?ahsenem F?r?nc?o?ullar?
on Oct 25, 2024
Verified
Under a binding price ceiling, what does the change in producer surplus represent?
A) The gain in surplus for those sellers who are still willing to supply the product at the lower price.
B) The loss in surplus associated with those units that used to be produced at the higher price but are no longer produced at the lower price.
C) The gain in surplus associated with the excess demand created by the price ceiling policy.
D) Both A and B are correct.
E) Both A and C are correct.
Price Ceiling
A legal maximum on the price at which a good can be sold.
Producer Surplus
The difference between what producers are willing to sell a good for and the actual price they receive.
Excess Demand
A situation where the quantity demanded of a good or service exceeds its quantity supplied at a particular price.
- Perceive the effects that state interventions, including price caps, exert on the balance of market activities, consumer surplus, and producer surplus.
- Familiarize yourself with the core principles of welfare economics with respect to enhancing market efficiency and the necessity for government involvement.
Verified Answer
AM
Learning Objectives
- Perceive the effects that state interventions, including price caps, exert on the balance of market activities, consumer surplus, and producer surplus.
- Familiarize yourself with the core principles of welfare economics with respect to enhancing market efficiency and the necessity for government involvement.