A price ceiling imposed below equilibrium price causes a deadweight loss for society because:
A)buyers benefit at the expense of sellers.
B)as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.
C)sellers benefit at the expense of buyers.
D)the poor gain at the expense of the rich.

Question

A price ceiling imposed below equilibrium price causes a deadweight loss for society because:​
A)​buyers benefit at the expense of sellers.
B)​as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.
C)​sellers benefit at the expense of buyers.
D)​the poor gain at the expense of the rich.

Quizplus · Accepted Answer

A price ceiling below equilibrium price creates a shortage of goods since the quantity demanded exceeds the quantity supplied. This results in excess demand, and some of the consumers who would have bought the good at the equilibrium price are unable to do so, leading to a deadweight loss of consumer surplus. Additionally, some potential sellers may not produce goods since they cannot earn enough revenue to cover their production costs at the price ceiling. As a result, the economy suffers a loss of both consumer surplus and producer surplus, causing a deadweight loss for society. In summary, a price ceiling that is set below the equilibrium price leads to a deadweight loss because it prevents mutually beneficial transactions between producers and consumers.

A Price Ceiling Imposed Below Equilibrium Price Causes a Deadweight