Assume a market price gets set artificially high-that is,it gets set above the equilibrium price.This change means:
A) Every consumer loses surplus, and it all gets transferred to producers.
B) Every producer gains surplus, due to the higher price now being charged.
C) Some consumers drop out of the market, and those left lose some surplus.
D) None of these is true.

Question

Quizplus · Accepted Answer

When the market price gets set artificially high, some consumers drop out of the market because they cannot afford to pay the higher price. This leads to a reduction in quantity demanded, and those who do purchase the good or service lose some surplus due to the higher price. Producers may gain surplus due to the higher price, but not all of the surplus is transferred to them, and some may be lost due to the decrease in quantity demanded. Therefore, choice C is the best answer.

Assume a Market Price Gets Set Artificially High-That Is,it Gets