Consider the hypothetical supply and demand of Kidneys. Initially,kidneys are exchanged by donations only (price=0).If the government decides to legalize kidney sales and the market reaches equilibrium,then:
A) total surplus increases.
B) consumer surplus remains the same.
C) producer surplus remains the same.
D) a shortage of kidneys will arise.

Question

Consider the hypothetical supply and demand of Kidneys.  Initially,kidneys are exchanged by donations only (price=0).If the government decides to legalize kidney sales and the market reaches equilibrium,then:
A) total surplus increases. 
B) consumer surplus remains the same. 
C) producer surplus remains the same. 
D) a shortage of kidneys will arise.

Quizplus · Accepted Answer

Legalizing kidney sales would increase the supply of kidneys, which would lower the price and increase the quantity supplied. This would lead to an increase in consumer surplus (as consumers pay less for kidneys) and an increase in producer surplus (as producers receive payment for their kidneys). The increase in total surplus (consumer surplus + producer surplus) would be the result of an increase in the quantity of kidneys exchanged, indicating that there would not be a shortage. Therefore, choice A is the best answer.

Consider the Hypothetical Supply and Demand of Kidneys