Refer to the accompanying figure. Suppose the dairy lobby convinces the government to impose price controls in this market. If the government requires cheese to be sold for a price of $8 per pound, then, relative to before the price controls, total consumer surplus in the market would:
A)increase.
B)decrease.
C)not change.
D)increase and then decrease.

Question

Refer to the accompanying figure. Suppose the dairy lobby convinces the government to impose price controls in this market. If the government requires cheese to be sold for a price of $8 per pound, then, relative to before the price controls, total consumer surplus in the market would: 
A)increase. 
B)decrease. 
C)not change. 
D)increase and then decrease.

Quizplus · Accepted Answer

Consumer surplus is the area of the triangle below the demand curve and above price. The area of any triangle is equal to ½(b × h), where b = base and h = height. So here, if the government requires cheese to be sold for $8 per pound, consumer surplus would equal ½(20 × 2)= $20. Note that this is less than consumer surplus at the market equilibrium price of $6 per pound.

Refer to the Accompanying Figure