Who gains from a price support? Who loses? Explain how the size of the gain compares to the size of the loss
What will be an ideal response?
Producers gain from a price support because the price of the good or service increases. As a result, the producer surplus increases. Consumers lose from a price support because the price the good or service increases. As a result, the consumer surplus decreases. Because a price support program creates a deadweight loss, it is the case that the decrease in consumer surplus exceeds the increase in producer surplus.
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Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?
A) $40,000 B) $100,000 C) $125,000 D) $140,000
When car dealerships post high prices for their cars and then negotiate deals based on their estimate of how much each person will pay,
a. the dealership will lose revenue b. marginal revenue and marginal cost are being used to set prices and output c. few dealerships will be able to survive d. rent-seeking behavior will lead new dealerships to enter the market e. this is a form of price discrimination
Let the demand function for a product be Q = 100 ? 2P. The inverse demand function of this demand function is:
A. P = 50 ? 0.5Q. B. P = 50 + 0.5Q. C. Q = 100 + 2P. D. None of the answers is correct.
Most economists agree on the amount of government intervention necessary in an economy.
Answer the following statement true (T) or false (F)