Assume a market that has an equilibrium price of $4.If the market price is set at $8,which of the following is true?
A) Some surplus is transferred from consumers to producers, but total surplus falls.
B) All surplus is transferred from consumers to producers, and total surplus stays the same.
C) Some surplus is transferred from producers to consumers, but total surplus falls.
D) Some surplus is transferred from consumers to producers, causing total surplus to increase.

Question

Quizplus · Accepted Answer

When the price is set above the equilibrium price, some consumer surplus is transferred to producers, but the total surplus decreases due to the creation of deadweight loss.

Assume a Market That Has an Equilibrium Price of $4