# Econ MC

Suppose that the equilibrium price in the market for widgets is \$5. If a law reduced the maximum
legal price for widgets to \$4,
a. consumer surplus would necessarily increase even if the lower price resulted in a
shortage of widgets.
b. consumer surplus would necessarily decrease because the lower price would create a
shortage of widgets.
c. consumer surplus might increase or decrease.
d. consumer surplus would be unaffected

can you explain which answer is correct, thanks.

Draw initial supply and demand curves (hint: have the demand curve start at the y-axis). Consumer surplus is represented by the area above price but below the demand curve. Now impose a price ceiling. Your graph should show two changes to consumer surplus -- and INCREASE (in area) because price is lower, and a DECREASE (in area) because suppliers are supplying less. So..... the correct answer is.......

1. 👍
2. 👎
3. 👁
1. coc

1. 👍
2. 👎

## Similar Questions

1. ### Microeconomics

Answer the following questions based on the graph that represents J.R.'s demand for ribs per week of ribs at Judy's rib shack. a. At the equilibrium price, how many ribs would J.R. be willing to purchase? b. How much is J.R.

2. ### Economics

In the country of Alpha, T-shirts are sold domestically in a competitive market, the equilibrium price is \$10, and the equilibrium quantity is 100. (a) Draw a correctly labeled demand and supply graph for the domestic T-shirt

3. ### economics

Suppose the market demand for good A given by Qd= 300 -20 P and the market supply for Good A is given by Qs=20P-100,where P=price of Good A. Q;Graph the supply and demand schedules for Good A using P5 through P15 as the value of

4. ### Social studies

1. Why do businesses seek an equilibrium price? A. It ensures that competitors cannot offer lower prices B. It attracts the largest possible number of consumers to the business •• C. It provides the highest possible prices

1. ### micro economics

1) Assume that the gold-mining industry is competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for the a representative gold mine. b) Suppose that an increase in jewellery demand induces a a

2. ### MicroEcon

The market for apple pies in the city is competitive and has the following demand schedule: Price Quantity Demanded \$1 1,200 2 1,100 3 1,000 4 900 5 800 6 700 etc... 13 0 Each producer in the market has fixed costs of \$9 and the

3. ### economics

The following information applies to the market for a particular items in the absence of a unit excise tax: Price(\$ per unit) Quantity Supplied Quantity Demanded 4 50 200 5 75 175 6 100 150 7 125 125 8 150 100 9 175 75 According

4. ### Math

The quantity demanded each month of russo Espresso Makers is 250 when the unit price is \$140; the quantity demanded each month is 1000 when th e unit price is \$110. the suppliers will market 750 expresso makers if the unit price

1. ### Economics

1.Which of the following is consistent with the law of supply? a.As the price of calculators rises, the supply of calculators increases, ceteris paribus. b.As the price of calculators falls, the supply of calculators increases,

2. ### economics 11

The demand and supply schedules for milk are as follows: Price Quantity Demanded Quantity Supplied 10 0 125 8 20 95 6 40 65 4 60 35 2 80 5 a. On the same graph, draw the demand and supply curves. What does the demand curve for a