This table repeats the buyer values and seller costs. In a market with no restri

Question

This table repeats the buyer values and seller costs. In a market with no restrictions on prices, the total gain captured by buyers and sellers will be $66, with $33 in gain for sellers and $33 in gain for buyers. (You can calculate these values by figuring out who trades at the equilibrium price and calculating how much gain each of them captures.) With a price ceiling of $8.50, fewer trades will take place. The total gain for buyers and sellers will be lower, although as you will see, it is uncertain exactly how much lower. These problems show you why the gain is uncertain. They also encourage you to think about the following question: Who wins and who loses when there is a price ceiling? If you were representing the interests of all buyers, would you be in favor of a price ceiling? Recall that the total gain without the price ceiling is $66. If you add your answer for the gain captured by sellers to each of your answers for the two problems about gain for buyers, you can calculate a range of possible values for total gain with a price ceiling. The range for total gain is: $45.00 to $62.50 $43.50 to $63.00 $44.00 to $61.00 $41.00 to $58.00 $42.50 to $62.00

Explanation / Answer

answer is C

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