The market for salmon is in equilibrium.A binding price ceiling,a binding price floor,and a quota limit below the market equilibrium in this market would all cause:
A)deadweight loss arising from a quantity exchanged that is less than the equilibrium quantity.
B)a supply price that exceeds a demand price.
C)revenue collected by the government on each unit of salmon harvested.
D)deadweight loss arising from a transfer of surplus from consumers to producers.

Question

Quizplus · Accepted Answer

A binding price ceiling, a binding price floor, and a quota limit below the market equilibrium would all result in a reduction in quantity exchanged in the market. This reduction in quantity would lead to deadweight loss, which is the loss of potential welfare that arises when the quantity exchanged is less than the efficient level. The deadweight loss occurs because some potential trades are not taking place that would have made both buyers and sellers better off. Therefore, the correct choice is A.

The Market for Salmon Is in Equilibrium