Suppose a new law makes illegal the sale of a good that had been legal. This will
A)decrease consumer surplus.
B)increase consumer surplus.
C)increase producer surplus.
D)eliminate deadweight loss.

Question

Quizplus · Accepted Answer

When a previously legal good becomes illegal, the supply of the good decreases and the price increases, resulting in a decrease in consumer surplus. Consumers are left with fewer options and must pay a higher price for the remaining legal goods. The producer surplus may increase as a result of the higher prices, but the deadweight loss from decreased consumption of the good is not eliminated.

Suppose a New Law Makes Illegal the Sale of a Good