Suppose That the Equilibrium Price in the Market for Widgets

question 15

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,

• A)the resulting increase in consumer surplus would be larger than any possible loss of producer surplus.
• B)the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus.
• C)any possible increase in producer surplus would be larger than the loss of consumer surplus.
• D)any possible increase in producer surplus would be smaller than the loss of consumer surplus.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in its price, indicating how sensitive the quantity is to price changes.

Quantity Demanded

The cumulative quantity of a product or service that buyers are ready and capable of buying at a certain price level.

Elasticity Coefficient

A numeric value that measures the responsiveness of the quantity demanded or supplied of a good to a change in its price.

Buyer Responsiveness

The degree to which consumers adjust their demand for a product or service in response to changes in price or other factors.