When the market price is set below the equilibrium price:
A) total surplus increases.
B) the market is efficient.
C) deadweight loss is zero.
D) producer surplus falls.

Question

Quizplus · Accepted Answer

When the market price is set below the equilibrium price, there is excess demand or a shortage of the good or service. This means that consumers are willing to pay more for the product than they currently are, while producers are not receiving their full value for each unit sold. As a result, producer surplus falls. The correct answer is D.

When the Market Price Is Set Below the Equilibrium Price