As compared to the market clearing price, the total amount of consumer surplus and producer surplus is
A) greater for a government-imposed price floor that is higher than that market clearing price.
B) greater for a government-imposed price ceiling that is lower than that market clearing price.
C) the same as a government-imposed price floor that is higher than that market clearing price.
D) smaller for a government-imposed price ceiling that is lower than that market clearing price.

Question

Quizplus · Accepted Answer

A government-imposed price ceiling that is lower than the market clearing price typically results in a shortage, as the quantity demanded exceeds the quantity supplied at that price. This leads to a decrease in both consumer and producer surplus, making the total surplus smaller compared to the market equilibrium where the market clearing price allows the quantity demanded to equal the quantity supplied.

As Compared to the Market Clearing Price, the Total Amount