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

Question

Quizplus · Accepted Answer

When the sale of a good is made illegal, it creates a decrease in the supply of the good, resulting in a decrease in producer surplus. Additionally, it may create a deadweight loss due to the decrease in the quantity of the good supplied and demanded. While it may limit consumer surplus to an extent, the decrease in producer surplus is likely to be greater.

Suppose a New Law Makes Illegal the Sale of a Good