Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus
Indicate whether the statement is true or false
False. One impact of a supply restriction is an exchange from consumers to producers. The net effect on social welfare is negative. Additionally, there is a deadweight loss. This is the additional surplus that could be generated if supply were not restricted. This effect is always negative. As a result, social welfare always declines in response to a supply restriction.
You might also like to view...
The use of a price system eliminates: a. scarcity
b. equilibrium. c. shortages and surpluses. d. changes in supply and demand.
If Country A has an absolute advantage over Country B in the production of every commodity:
a. mutual gains from trade between Country A and Country B would be impossible. b. Country B would be able to gain from trade but not country A. c. the joint output of the two countries could not be increased through specialization and exchange. d. mutual gains from trade would still be possible.
In the long run when monopolistically competitive firms advertise,
a. they will still earn zero economic profit b. they can earn positive economic profit by increasing market share c. the market price must fall d. the market price must rise e. there will be fewer units sold than in the short run
The formula for nominal GDP is
a. Nominal GDP = Real GDP + GDP Deflator. b. Nominal GDP = Real GDP – GDP Deflator. c. Nominal GDP = GDP Deflator / Real GDP. d. Nominal GDP = GDP Deflator x Real GDP.