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

Question

Quizplus · Accepted Answer

If the market price is set artificially low, it means there is a surplus of goods, which will cause some producers to drop out of the market since they can't earn a profit at that price. The producers who remain in the market will lose some surplus since they now have to sell their goods at a lower price. Consumers may gain surplus due to the lower prices, but this will depend on the elasticity of demand for the good.

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