A price support set above the equilibrium price does which of the following?
i.decreases producer surplus
ii.decreases consumer surplus
iii.decreases the marginal cost of the last unit produced
A) i and ii
B) i and iii
C) ii and iii
D) i, ii, and iii
E) ii only

Question

Quizplus · Accepted Answer

A price support set above the equilibrium price decreases consumer surplus because it raises the price above what it would be in a free market, making consumers pay more. It does not decrease producer surplus; instead, it typically increases it because producers can sell their goods at a higher price. It also does not affect the marginal cost of the last unit produced, which is determined by production costs, not the price at which goods are sold.

A Price Support Set Above the Equilibrium Price Does Which