When the government controls the price of a product, causing the market price to be above the free market equilibrium price,
A) all producers gain.
B) both producers and consumers gain.
C) only consumers gain.
D) some, but not all, sellers can find buyers for their goods.

Question

Quizplus · Accepted Answer

When the government controls the price of a product and sets it above the free market equilibrium price, there is excess supply (quantity supplied is greater than quantity demanded) which tends to create a surplus. Some sellers can find buyers for their goods but others may have difficulty finding buyers at the higher price. Therefore, only some sellers gain, while others lose out. Consumers do not gain since they are required to pay a higher price for the product.

When the Government Controls the Price of a Product, Causing