Suppose that a binding output quota is imposed on this market at quantity Q₁. The total economic surplus before the imposition of the quota was equal to O A. areas 1, 2, 3, 5, and 6. O B. areas 5, 6, and 7. c. areas 1, 2, and 3. O D. areas 2 and 5. OE. areas 4 and 7.

Suppose that a binding output quota is imposed on this market at quantity Q₁. The total economic surplus before the imposition of the quota was equal to O A. areas 1, 2, 3, 5, and 6. O B. areas 5, 6, and 7. c. areas 1, 2, and 3. O D. areas 2 and 5. OE. areas 4 and 7.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 3PA

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Concept explainers

Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.

Question

Suppose that a binding output quota is imposed on this market at quantity Q₁.
The total economic surplus before the imposition of the quota was equal to
O A. areas 1, 2, 3, 5, and 6.
OB. areas 5, 6, and 7.
O c. areas 1, 2, and 3.
O D. areas 2 and 5.
OE. areas 4 and 7.
2
K
Po
6
7
4 Q₁
Quantity
Supply
Demand

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