Refer to Resource Supply/Demand. If the government confiscates the rent and pays the owner area D to supply Q0 units of the resource at a zero price, then
The following questions refer to the accompanying graph, which shows the supply and demand for a resource. The owner of the resource is receiving the price P0 and is providing the quantity Q0.
a. area B + C is transferred from the resource owner to the government with no loss in social gain.
b. area A + B + C overestimates the social gain that will be created.
c. demanders will continue to receive area A + B + C + D in value from the resource.
d. a deadweight loss equal to area B + C will be created.
b. area A + B + C overestimates the social gain that will be created.
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