-Refer to the diagram above.Assume that a price ceiling is imposed at point G,i.e. ,the price is now represented by the distance 0G.The triangle FEC represents the
A) increase in producer surplus due to the price ceiling.
B) reduction in consumer surplus due to the price ceiling.
C) increase in total economic surplus due to the price ceiling.
D) the value of the surplus caused by the price ceiling.
E) decrease in total economic surplus due to the price ceiling.

Question

-Refer to the diagram above.Assume that a price ceiling is imposed at point G,i.e. ,the price is now represented by the distance 0G.The triangle FEC represents the
A) increase in producer surplus due to the price ceiling. 
B) reduction in consumer surplus due to the price ceiling. 
C) increase in total economic surplus due to the price ceiling. 
D) the value of the surplus caused by the price ceiling. 
E) decrease in total economic surplus due to the price ceiling.

Quizplus · Accepted Answer

The triangle FEC represents the deadweight loss, which is the decrease in total economic surplus due to the price ceiling. This area shows the loss of efficiency in the market as the quantity traded is reduced from the equilibrium level.

-Refer to the Diagram Above