Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price ceiling equal to P₃,buyers lose consumer surplus equal to area ____,but gain consumer surplus equal to area ____.

Question

Quizplus · Accepted Answer

When the government imposes a price ceiling equal to PS1U1B13S1U1B0, the new market price is PS1U1B0. At this new equilibrium, buyers lose consumer surplus equal to area E, which is the difference between the original demand curve and the new price line. However, they gain consumer surplus equal to area C, which is the difference between the new price line and the horizontal axis. Area F is the producer surplus lost as a result of the price ceiling. Therefore, choice B is the correct answer.