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.

---

Definitions:

Production Possibilities Frontier

A curve depicting the maximum feasible amounts of two different goods that can be produced with available resources and technology.

Aggregate Supply Curve

A graphical representation showing the total supply of goods and services that firms in an economy are willing and able to produce at different price levels.

Maximum Output Level

The highest quantity of goods or services an economy or enterprise can produce using its current resources and technology.

Cyclical Unemployment

When people are out of work because the economy is operating below the full-employment level. It rises sharply during recessions.