Maximum price/ price ceiling

What is CS before maximum price?

• A + B + E

• A + B + C

• C + F + D

• B + C + D

What is PS before maximum price?

• A + B + E

• A + B + C

• C + F + D

• B + C + D

What is PS after maximum price?

• A

• A + B + C

• D

• B + C + D

What is CS after maximum price?

• A

• A + B + C

• D

• B + C + D

What is DWL/welfare loss ?

• C + F

• A + B + C

• B + E

• E + F

What is a consequence of introducing a maximum price ?

• Government revenue

• Increase in supply

• Surplus

• Shortage

Allocative efficiency occurs when?

• MB = MC

• Qd > Qs

• There is DWL

• There is a surplus

What is the shortage caused by the price ceiling?

• 600

• 800

• 1000

• 400

What is the change in producer revenue because of the maximum price?

• 1400

• 3200

• 3000

• 1000

Calculate the DWL?

• $80000

• $40000

• $20000

• $5000