Total surplus in a market will increase when the government a. imposes a binding price floor or a binding price ceiling on that market. b. imposes a tax on that market. c. Both a and b are correct. d. Neither a nor b is correct.

Question

Freddy Garza

Business

25 February, 02:09

Total surplus in a market will increase when the government a. imposes a binding price floor or a binding price ceiling on that market. b. imposes a tax on that market. c. Both a and b are correct. d. Neither a nor b is correct.

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Answers (1)

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Giuliana Harding · Answer 1

D. Neither a nor b is correct.

Explanation:

Total surplus is an economic term used to describe the general well-being of the population, it is the sum of the Consumer surplus and the producer surplus.

Price ceiling is an economic term used buy Government to prevent producers or suppliers from selling above a certain fixed price. Price ceiling does not create surplus it creates insufficiency.

Price floor is an economic term that is placed by Government below which the products or services can not be sold.

It can only lead to surplus when for the producers when fixed above the Equilibrium price and shortage when fixed below the Equilibrium price.