Asked by
Francesca DiCarlo
on Oct 25, 2024
Verified
Refer to Figure 9.2.1 above. When the minimum imposed price is P2, areas B + C are:
A) the deadweight loss to consumers as a result of the price control.
B) the deadweight loss to producers as a result of the price control.
C) the deadweight loss to both producers and consumers as a result of the price control.
D) gains transferred from consumers to producers.
Minimum Imposed Price
A price floor set by the government, preventing prices from falling below a certain level.
Deadweight Loss
An economic inefficiency that occurs when market equilibrium is not achieved or is distorted, typically due to a price floor, ceiling, or tax.
Price Control
A government-imposed limit on the price charged for a product.
- Analyze diagrams of market structures to pinpoint zones that denote consumer and producer surpluses, alongside deadweight losses.
- Comprehend the idea of deadweight loss and its manifestation resulting from market disruptions.
- Understand the fundamentals of welfare economics concerning market efficiency and governmental interference.
Verified Answer
LC
Learning Objectives
- Analyze diagrams of market structures to pinpoint zones that denote consumer and producer surpluses, alongside deadweight losses.
- Comprehend the idea of deadweight loss and its manifestation resulting from market disruptions.
- Understand the fundamentals of welfare economics concerning market efficiency and governmental interference.