Under a Binding Price Ceiling, What Does the Change in Producer

question 4

Multiple Choice

Under a binding price ceiling, what does the change in producer surplus represent?

• A) The gain in surplus for those sellers who are still willing to supply the product at the lower price.
• B) The loss in surplus associated with those units that used to be produced at the higher price but are no longer produced at the lower price.
• C) The gain in surplus associated with the excess demand created by the price ceiling policy.
• D) Both A and B are correct.
• E) Both A and C are correct.

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Definitions:

Munn v. Illinois

An 1877 U.S. Supreme Court case that upheld the power of state governments to regulate private industries in the public interest.

Supreme Court

The highest federal court in the United States, with ultimate appellate jurisdiction over all federal and state court cases that involve a point of federal law.

Gilded Age

A period in the late 19th century characterized by rapid industrialization, economic growth, and ostentatious displays of wealth in the U.S.