Consider the competive market for eggs ilustrated in the figuse to the right t a
ID: 1143206 • Letter: C
Question
Consider the competive market for eggs ilustrated in the figuse to the right t a binding price control is set at 3 cents then compered to equlibrium cosumer surplus would O A. increase by area C and decrease by area E. O 8. increase by areas C and F O C. decrease by areas B and O D. decrease by area B 0 E. ncrease by area C In turn, producer surplus would O A increase by aress C and F O B increase by area O C. decrease by area C O D. decrease by areas C and F O E. increase by aress B and E Consequently, at a price of 3 cents, deadweight loss wouid equal O A. areaE O B. no areas O C. area F O D. areas E and F O E. as B, C, E and FExplanation / Answer
Original Consumer Surplus = A+B+E
Original Producer Surplus = C+D+F
If a price control is done at $3 in this market.
The new consumer surplus = A+B+C (That is an increase in CS by C and decrease by E)
The new producer surplus= D (That is an decrease in PS by C and F)
Deadweight loss =E+F