If the government intervened in the market by lowering the price of a good below the equilibrium price,which scenario would NOT occur?
A)Some consumers would receive an increase in consumer surplus.
B)Producers would likely lose some producer surplus.
C)The outcome would be efficient.
D)Total surplus would be lower.

Question

Quizplus · Accepted Answer

If the government intervenes in the market by lowering the price of a good below the equilibrium price, it would create a shortage of the good as the quantity demanded would be greater than the quantity supplied at the lower price. Therefore, the outcome would not be efficient as some consumers who are willing to pay a higher price will not be able to buy the good, and producers may cut back on production which may lead to a decrease in quality, suppliers or employees. The reduction in price would increase consumer surplus, and producers would likely lose some producer surplus. However, total surplus would be lower due to the inefficiency and shortage created by the government intervention.

If the Government Intervened in the Market by Lowering the Price