Which of the following would decrease the social welfare? A. Monopoly B. Unit taxes collected from...
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Which of the following would decrease the social welfare?
A. Monopoly
B. Unit taxes collected from producers
C. Price ceiling that has an impact on the market equilibrium
D. All of the above
Homework Answers
Market equilibrium occurs at the intersection of market demand and market supply. At the market equilibrium point, social welfare (total surplus) is maximum. Any distortion from the market equilibrium point results in a decrease in social welfare (total surplus) or creates a deadweight loss.
In a perfect competition market equilibrium point, the total surplus is maximized. Monopoly market leads to a fall in social welfare and creates deadweight loss.
The imposition of unit taxes collected from producers also leads to a decrease in social welfare (because of distortion from market equilibrium point)
Price ceiling (below the equilibrium price) that has an impact on the market equilibrium leads to a decrease in social welfare (because of distortion from market equilibrium point)
Answer: Option (D).
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Refer to the table above. If the market is originally in
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A. Net surplus in the economy will decrease
B. Producer surplus will decrease
C. Supply will decrease
D. Consumers will purchase less than they would at the
equilibrium price
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price
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Refer to the table above. If the market is originally in
equilibrium and a price ceiling of $50 is imposed, which of the
following is incorrect?
A. Net surplus in the economy will decrease
B. Producer surplus will decrease
C. Supply will decrease
D. Consumers will purchase less than they would at the
equilibrium price
E. Producers will sell less than they would at the equilibrium
price
Supply P* Gi Demand Qd Qs Quantity
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