With reference to the graph above, if the intended aim of the price ceiling shown was a net increase in the well-being of consumers, then positive analysis would conclude:
A. the policy was effective, since area A + C is larger than B + D.
B. the policy was ineffective, since A + C + D is larger than B + E.
C. the policy was effective, since area B is smaller than area D.
D. the policy was ineffective, since D is larger than E.
Answer: C
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Expected utility theory predicts that individuals will fully insure in actuarily fair markets so long as their tastes are state-independent. How might adverse selection result in some individuals under-insuring?
What will be an ideal response?
If a country is an exporter of a good, then it must be the case that
a. the world price is less than its domestic price. b. consumer surplus is higher than a no trade situation. c. the world price is greater than its domestic price. d. they used an infant-industry argument to protect its producers.
A Broadway theater sells weekday show tickets at a lower price than for a weekend show. This is an example of:
A. peak-load pricing. B. price discrimination. C. price discrimination or peak-load pricing. D. None of the statements is correct.
The demand curve for a perfectly competitive industry is
A. upward sloping. B. vertical. C. downward sloping. D. horizontal.