Suppose that the equilibrium price in the market for widgets is $5. If a law reduced the maximum legal price for widgets to $4, the resulting increase in producer surplus would be larger than any possible loss of consumer surplus any possible increase in consumer surplus would be larger than the loss of producer surplus the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus any possible increase in consumer surplus would be smaller than the loss of producer surplus
Suppose that the equilibrium price in the market for widgets is $5. If a law reduced the maximum legal price for widgets to $4, the resulting increase in producer surplus would be larger than any possible loss of consumer surplus any possible increase in consumer surplus would be larger than the loss of producer surplus the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus any possible increase in consumer surplus would be smaller than the loss of producer surplus
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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It says the option four is correct. Can you explain how? If you can graph it so that I can see it that would be awesome. To me, it seems like the gain in consumer surplus would be larger than the loss of producer surplus . But the correct option, option D says that’s not right.
Transcribed Image Text:in this market.
s equilibrium allocation of resources efficient? That is, does it maxi
plus? To answer this question, recall that when a market is in equilib-
e determines which buyers and sellers participate in the market. T
who value the good more than the price (represented by the seg
Price
A
Supply
Consumer
surplus
quilibrium
price
E
Producer
surplus
Demand
В
Equilibrium
quantity
Quantity
Transcribed Image Text:Suppose that the equilibrium price in the market for widgets is $5. If a law reduced
the maximum legal price for widgets to $4,
the resulting increase in producer surplus would be larger than any possible loss of
consumer surplus
any possible increase in consumer surplus would be larger than the loss of producer
surplus
the resulting increase in producer surplus would be smaller than any possible loss of
consumer surplus
any possible increase in consumer surplus would be smaller than the loss of producer
surplus
any possible increase in consumer surplus
would be smaller than the loss of producer
surplus. You selected this answer.
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