Now suppose the government applies a price ceiling of p₁ Compared with the market-clearing equilibrium, consumer surplus would A. increase by area B. B. increase by areas B and F OC. increase by area C and decrease by area E. OD. decrease by area E. OE. increase by area C. In turn, producer surplus would OA. decrease by areas B, E, and G. B. increase by area B. C. decrease by areas B and E. D. decrease by areas C and F. OE. decrease by area C. Consequently, with the price ceiling, deadweight loss would equal 0 A. area E. B. area F. C. areas B, C, E, and F. D. areas E and F. E. no areas.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Consider the market for electricity illustrated in the figure to the right. Suppose the
market is perfectly competitive and initially in equilibrium at a price of p₂ and a
quantity of Q₂.
Now suppose the government applies a price ceiling of p₁ Compared with the
market-clearing equilibrium, consumer surplus would
OA. increase by area B.
B. increase by areas B and F
OC. increase by area C and decrease by area E.
O D. decrease by area E
OE. increase by area C.
In turn, producer surplus would
O A. decrease by areas B, E, and G.
B. increase by area B.
C. decrease by areas B and E.
D. decrease by areas C and F.
OE. decrease by area C.
Consequently, with the price ceiling, deadweight loss would equal
O A. area E
B. area F
C. areas B, C, E, and F.
D. areas E and F.
OE. no areas.
Price of electricity
P3
P2
P₁
A
B
C
D
EF
G
Q₂
Q3
Quantity of electricity
S
D
Transcribed Image Text:Consider the market for electricity illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p₂ and a quantity of Q₂. Now suppose the government applies a price ceiling of p₁ Compared with the market-clearing equilibrium, consumer surplus would OA. increase by area B. B. increase by areas B and F OC. increase by area C and decrease by area E. O D. decrease by area E OE. increase by area C. In turn, producer surplus would O A. decrease by areas B, E, and G. B. increase by area B. C. decrease by areas B and E. D. decrease by areas C and F. OE. decrease by area C. Consequently, with the price ceiling, deadweight loss would equal O A. area E B. area F C. areas B, C, E, and F. D. areas E and F. OE. no areas. Price of electricity P3 P2 P₁ A B C D EF G Q₂ Q3 Quantity of electricity S D
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