If price is lowered by law from a market equilibrium value of $5 to a lower value of $4,
A) both producer surplus and consumer surplus will increase.
B) consumer surplus will increase and there will be a loss in total economic surplus.
C) producer surplus will increase and there will be a loss in total economic surplus.
D) there will be a loss in total economic surplus,as both producer surplus and consumer surplus will decrease.
E) both producer surplus and consumer surplus will remain unchanged.

Question

Quizplus · Accepted Answer

When the price is lowered by law from a market equilibrium value of $5 to a lower value of $4, consumer surplus will increase as consumers can now purchase the same amount of goods for a lower price. However, producer surplus will decrease as producers receive less revenue for each unit sold. This results in a loss of total economic surplus.

If Price Is Lowered by Law from a Market Equilibrium