(Figure: Quantity Controls)Use Figure: Quantity Controls.If the government decides to restrict the quantity sold to 100,which statement is FALSE?
A)Total surplus will fall by areas C and E.
B)The market is not at the free-market equilibrium.
C)Consumer surplus is maximized.
D)Some mutually beneficial transactions have been eliminated.

Question

(Figure: Quantity Controls)Use Figure: Quantity Controls.If the government decides to restrict the quantity sold to 100,which statement is FALSE? 
A)Total surplus will fall by areas C and E. 
B)The market is not at the free-market equilibrium. 
C)Consumer surplus is maximized. 
D)Some mutually beneficial transactions have been eliminated.

Quizplus · Accepted Answer

If the government restricts the quantity sold to 100, then the market is not at the free-market equilibrium, some mutually beneficial transactions have been eliminated, and total surplus will fall by areas C and E. However, consumer surplus may not necessarily be maximized as consumers are now facing a shortage, and some may be willing to pay even more than the restricted price to obtain the good.