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

Quizplus · Accepted Answer

Both a binding price floor or ceiling and a tax imposed by the government create market inefficiencies that reduce total surplus. A price floor or ceiling creates a deadweight loss, while a tax increases the cost of production and reduces supply, leading to higher prices and a decrease in consumer surplus. Therefore, neither option will increase total surplus in the market.

Total Surplus in a Market Will Increase When the Government