A quick recap: Total surplus (Consumer Surplus + Producer Surplus) is maximized at the free market equilibrium. Government interventions like price controls can change how the surplus is distributed, but they almost always reduce the total surplus, creating deadweight loss.

Engagement Message

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Type

Multiple Choice

Practice Question

The government imposes a price floor on milk to help dairy farmers. The floor is set above the equilibrium price. What is the result?

A. A shortage of milk and an increase in total surplus. B. A surplus of milk and a decrease in total surplus. C. A shortage of milk and a decrease in total surplus. D. A surplus of milk and an increase in total surplus.

Suggested Answers

• A
• B - Correct
• C
• D

Type

Fill In The Blanks

Markdown With Blanks

Let's analyze a price ceiling on apartment rentals (rent control). Fill in the blanks.

A price ceiling set below the equilibrium rent creates a [[blank:shortage]] of apartments. This policy creates [[blank:deadweight loss]] because some mutually beneficial trades between landlords and renters no longer happen.

Suggested Answers

• shortage
• surplus
• deadweight loss
• producer surplus

Type

Sort Into Boxes

Practice Question

Sort these outcomes of a price floor (like a minimum wage) into the correct boxes.

Labels

• First Box Label: Benefits
• Second Box Label: Costs