Suppose the market for kidneys is depicted in the graph shown. Initially, kidneys are exchanged by donations only (price = $0). If the government decides to legalize kidneys sales and the market reaches equilibrium, then:
A) total surplus will increase.
B) consumer surplus will remain the same.
C) producer surplus will remain the same.
D) a shortage of kidneys will arise.

Question

Suppose the market for kidneys is depicted in the graph shown.  Initially, kidneys are exchanged by donations only (price = $0). If the government decides to legalize kidneys sales and the market reaches equilibrium, then:
A) total surplus will increase. 
B) consumer surplus will remain the same. 
C) producer surplus will remain the same. 
D) a shortage of kidneys will arise.

Quizplus · Accepted Answer

Legalizing kidney sales will increase the market price from $0 to a positive level, resulting in a transfer of surplus from consumers (who previously received kidneys for free) to producers (who now receive payment for kidneys). As a result, total surplus in the market will increase. Additionally, legalizing kidney sales may increase the supply of kidneys (as some individuals may be willing to sell their kidneys for a price), potentially reducing the shortage of kidneys in the market.

Suppose the Market for Kidneys Is Depicted in the Graph