A price support leads to inefficiency because
A) output is more than the efficient, equilibrium quantity.
B) the marginal benefit of the last unit produced is larger than the marginal cost.
C) the price charged is less than the equilibrium price.
D) producer surplus is less than consumer surplus.
E) producers must pay a subsidy to the government.

Question

Quizplus · Accepted Answer

A price support artificially increases the price of a good, which leads to an increase in quantity supplied and a decrease in quantity demanded. This results in a situation where output is more than the efficient, equilibrium quantity, leading to a deadweight loss and inefficiency in the market.

A Price Support Leads to Inefficiency Because