Asked by Samantha DiJohn on May 11, 2024
Verified
If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.
Producer Surplus
The difference between the amount producers are willing to accept for a good or service and the actual amount they receive due to higher market price.
Binding Price Ceiling
A government-imposed limit on the price of a product or service that is set below the market equilibrium, leading to shortages and a decrease in supply.
- Acquire knowledge about the influence of government policies, including price ceilings and floors, on the surplus experienced by producers and consumers.
- Realize the importance and processes for quantifying producer surplus.
Verified Answer
AH
Alexander HartzlerMay 17, 2024
Final Answer :
True
Explanation :
Removing a binding price ceiling allows the market price to increase to the equilibrium level, leading to an increase in producer surplus because producers can sell their goods at higher prices, thus earning more on each unit sold.
Learning Objectives
- Acquire knowledge about the influence of government policies, including price ceilings and floors, on the surplus experienced by producers and consumers.
- Realize the importance and processes for quantifying producer surplus.