The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,producer surplus will fall by an amount given by the area ????_____

Question

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,producer surplus will fall by an amount given by the area ????_____ <>

Quizplus · Accepted Answer

When the government imposes a price ceiling of $10, the new price will be below the equilibrium price (P2), and the quantity demanded will exceed the quantity supplied, resulting in a shortage. The producer surplus will fall by an area represented by the difference between the original equilibrium price (P1) and the new price ($10) multiplied by the original quantity supplied (Q1). This is represented by the triangle B + E. Therefore, the correct choice is C. Area B represents the decrease in consumer surplus, and area A represents the inefficiency loss or deadweight loss created by the price ceiling.

The Demand and Supply Curves in the Market for Gasoline