An effective price ceiling causes a loss of:
A) producer surplus for certain and possibly consumer surplus as well.
B) consumer surplus only.
C) producer surplus only.
D) consumer surplus for certain and possibly producer surplus as well.
E) neither producer nor consumer surplus.

Question

Quizplus · Accepted Answer

An effective price ceiling is a government-imposed limit on how high a price can be charged for a good or service. When the price ceiling is set below the market equilibrium price, it causes a shortage of the good or service. This shortage leads to a decrease in producer surplus as they are forced to sell their product at a lower price than they would have in a free market. Additionally, there is a possibility that consumer surplus may also decrease if some consumers are unable to purchase the product due to the shortage. Therefore, an effective price ceiling can cause a loss of both producer surplus for certain and possibly consumer surplus as well.

An Effective Price Ceiling Causes a Loss Of