With Reference to the Graph Above, If the Intended Aim

question 79

Multiple Choice

With reference to the graph above, if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers, then normative analysis would conclude that:

• A) the policy was effective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
• B) the policy was ineffective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
• C) the policy was effective, since surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
• D) there is no "right" conclusion to be reached (in a normative sense), since people have different opinions concerning what constitutes a better outcome.

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Definitions:

Local Governments

Governmental authorities that operate at a level below the state or national, managing local affairs such as city, town, or village administration.

Tax Revenue

The earnings collected by governments as a result of taxation.

State Governments

The administrative bodies governing individual states within a federal system, responsible for local laws and policies.

Expenditure Item

A specific category of spending, often detailed in budgets or financial reports, representing the purchase of goods or services.