Question

If high prices are the result of government intervention:

- overall producer _____ can increase & decrease
- Some producers will be better off b/c they can sell a good or a service at a _____ price
- some producers will be worse off b/c they cannot sell a _____ or a _____

Answer 1

Government intervention with price controls can lead to increased or decreased producer surplus, depending on the measure. Some producers may benefit from the ability to sell at guaranteed higher prices, while others could suffer from lower sales or profits.

Step-by-step explanation:

When government intervenes in a market to control prices, a variety of outcomes can occur. If the government sets price ceilings or price floors, this can disrupt the natural equilibrium of supply and demand. Overall producer surplus can increase or decrease depending on the type of intervention. Price controls may benefit some producers who can sell their goods or services at a higher price due to a price floor, securing them a minimum profit.

However, other producers may be worse off because they cannot sell their product at all if the controlled price is too high and thus decreases the quantity demanded. Similarly, if a price ceiling is set too low, producers might sell all their stock but at a lower profit margin or potentially at a loss.