Use the following statements to answer this question: I. When the market price is held above the competitive price level, it is possible for the loss in consumer surplus to be fully captured by producers.
II) When the market price is held above the competitive level, there is no deadweight loss because producer gains exactly equal consumer losses.
A) I and II are true.
B) I is true and II is false.
C) II is true and I is false.
D) I and II are false.

Question

Quizplus · Accepted Answer

Statement I is true because when the market price is held above the competitive price level, producers can capture the full loss in consumer surplus by charging a higher price. However, statement II is false because there is still a deadweight loss when the market price is held above the competitive level. This is because the quantity demanded decreases as price increases, meaning some potential buyers will no longer purchase the good at the higher price, resulting in a reduction in overall surplus.

Use the Following Statements to Answer This Question: I