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Question
When the price of a good decreases and all else is held constant
a. producer surplus increases.
b. both consumer surplus and producer surplus decrease.
c. both consumer surplus and producer surplus increase.
d. producer surplus decreases.
e. consumer surplus decreases.
Answer
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What is the long-run consequence of a price ceiling law?
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Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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