According to the graph shown, if the market goes from equilibrium to having its price set at $10 then:
A) the market ceases to be efficient.
B) total surplus will decline.
C) deadweight loss will occur.
D) All of these are true.

Question

According to the graph shown, if the market goes from equilibrium to having its price set at $10 then:
A) the market ceases to be efficient. 
B) total surplus will decline. 
C) deadweight loss will occur. 
D) All of these are true.

Quizplus · Accepted Answer

When the market price is set at $10, it is no longer at the equilibrium price and quantity, leading to a decrease in efficiency. This also results in a decrease in total surplus, as some individuals who were previously willing to pay a higher price are now excluded from the market. The difference between the previous equilibrium quantity and the new quantity at the $10 price also creates deadweight loss. Therefore, all three statements are true.

According to the Graph Shown, If the Market Goes from Equilibrium