Assume a market price gets set artificially high-that is,it gets set above the equilibrium price.This change means:
A)Every consumer loses surplus,and it all gets transferred to producers.
B)Some consumers drop out of the market,and those left lose some surplus.
C)Every producer gains surplus,due to the higher price now being charged.
D)None of these is true.

Question

Quizplus · Accepted Answer

When the market price gets set artificially high, it creates a situation of excess supply, as producers are willing to supply more at the higher price, but the consumers are not willing or able to purchase as much at the higher price. This leads to some consumers dropping out of the market, as they cannot afford the new higher price. The consumers who remain in the market lose some of their surplus, as they have to pay more for the same quantity of goods. However, not all of the consumer surplus gets transferred to producers, as some producers may face lower demand or may have to incur higher costs to produce at the higher price. Therefore, choice B is the best answer.

Assume a Market Price Gets Set Artificially High-That Is,it Gets