In Venezuela, the government has implemented price controls on cornmeal, and the resulting shortage created a black market for the product.When compared to the competitive equilibrium, this situation has resulted in a transfer of ________ to black market sellers.
A)only consumer surplus
B)both consumer surplus and producer surplus
C)only producer surplus
D)deadweight loss

Question

Quizplus · Accepted Answer

The implementation of price controls has led to a shortage of cornmeal, which means that there is excess demand for the product at the government-mandated price. As a result, some consumers are willing to pay more than the controlled price to obtain the cornmeal they need. This creates an opportunity for black market sellers, who can sell the cornmeal at a higher price than they would be able to in a competitive market. This transfer of surplus from consumers to black market sellers results in a loss of both consumer surplus and producer surplus, which is captured by the black market sellers. Therefore, the correct answer is B, both consumer surplus and producer surplus.

In Venezuela, the Government Has Implemented Price Controls on Cornmeal