The Health Ministry announces that eating chocolate increases tooth decay.As a result, the equilibrium market price _____ and producer surplus of chocolate _____.

Question

Quizplus · Accepted Answer

The announcement by the Health Ministry leads to a decrease in demand for chocolate as the perception of its negative health effects increases. This leads to a decrease in the equilibrium market price of chocolate. Additionally, as the quantity of chocolate demanded decreases, the producer surplus of chocolate also decreases, as producers are able to sell fewer units of the good at a lower price.

The Health Ministry Announces That Eating Chocolate Increases Tooth Decay