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2 months ago

Question 1.

The total amount of consumer surplus and producer surplus is at its maximum when

• the government imposes a price floor that is higher than the market clearing price.

• consumers and producers are allowed to trade at the market clearing price.

• free market exchanges do not exist.

• the government imposes a price ceiling that is lower than the market clearing price.

Question 2.

As compared to the market clearing price, the total amount of consumer surplus and producer surplus is

• the same as a government-imposed price floor that is higher than that market clearing price.

• greater for a government-imposed price floor that is higher than that market clearing price.

• smaller for a government-imposed price ceiling that is lower than that market clearing price.

• greater for a government-imposed price ceiling that is lower than that market clearing price.
Source  Download
Economics Today: The Micro View
Edition: 19th
Author:
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Answer 1

consumers and producers are allowed to trade at the market clearing price.

Answer 2

smaller for a government-imposed price ceiling that is lower than that market clearing price.
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