A Price Support Leads to Inefficiency Because

question 46

Multiple Choice

A price support leads to inefficiency because

• A) output is more than the efficient, equilibrium quantity.
• B) producer surplus is less than consumer surplus.
• C) the price charged is less than the equilibrium price.
• D) producers must pay a subsidy to the government.
• E) the marginal benefit of the last unit produced is larger than the marginal cost.

---

Definitions:

Economic Models

Simplified representations of reality used to analyze and predict economic phenomena.

High Salaries

Compensation levels significantly above the average for comparable positions, typically reflecting high skill levels, experience, or demand.

Reality

The actual condition of affairs, in contrast to a theoretical or imaginary version of them.

Good Theory

A well-substantiated explanation of some aspect of the economic world that can predict outcomes and withstand empirical testing.