If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market,
A) consumer surplus would decline.
B) producer surplus would increase.
C) taxation would solve the problem.
D) total surplus in the market would decline.

Question

Quizplus · Accepted Answer

If firms are forced to produce more output than they normally would in a perfectly competitive market, the cost of production will increase, leading to a decline in total surplus. This is because the additional production will not be valued by consumers as much as the cost of producing it, resulting in a net loss of value for the market. Therefore, total surplus in the market would decline.

If Activists Successfully Lobbied Government to Force Firms to Produce