Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ______, which is ______ less than when the market is unregulated market.
A)$8; $24
B)$24; $8
C)$24; $16
D)$48; $8

Question

Refer to the figure below.  If a price ceiling were imposed at $4, total economic surplus would be ______, which is ______ less than when the market is unregulated market.
A)$8; $24 
B)$24; $8 
C)$24; $16 
D)$48; $8

Quizplus · Accepted Answer

If a price ceiling were imposed at $4, the quantity demanded would exceed the quantity supplied, leading to a shortage. The new equilibrium quantity would be 6 units. At this quantity, the maximum price that both buyers and sellers are willing to pay is $4. Total economic surplus would be the area of triangle ABC, which is (1/2)*6*4 = $12. Consumer surplus would be the area of triangle ABD, which is (1/2)*6*(8-4) = $12. Producer surplus would be the area of triangle BCD, which is (1/2)*6*(4-0) = $12. Therefore, total economic surplus would be $12 + $12 = $24. This is $8 less than when the market is unregulated ($32). Therefore, the answer is B.

Refer to the Figure Below