Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

Question

Quizplus · Accepted Answer

One impact of a supply restriction is an exchange from consumers to producers.The net effect on social welfare is negative.Additionally,there is a deadweight loss.This is the additional surplus that could be generated if supply were not restricted.This effect is always negative.As a result,social welfare always declines in response to a supply restriction.

Policies That Restrict Supply Could Generate an Increase in Social