If the government has imposed a quota of $Q_{1}$ on the market for tomato soup, what area(s) represent surplus that was effectively reallocated from consumers to producers*?

Choose 1 answer:
(A) $V$
(B) $S$
(c) $W$
(D) $R$
(E) $T$
Related content
How price controls reallocate surplus

Question

If the government has imposed a quota of $Q_{1}$ on the market for tomato soup, what area(s) represent surplus that was effectively reallocated from consumers to producers*?

Choose 1 answer:
(A) $V$
(B) $S$
(c) $W$
(D) $R$
(E) $T$
Related content
How price controls reallocate surplus

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Quota: A quota is a government-imposed limit on the quantity of a good that can be produced or sold. ‖ ‖ b ⋮ Surplus Reallocation: When a quota is imposed, it restricts the quantity to $Q_1$, leading to a reallocation of surplus from consumers to producers. ‖ ‖ c ⋮ Identifying Areas: On the graph, the area $V$ represents the surplus that was reallocated from consumers to producers due to the quota. ‖ ∻Answer∻ ⚹ (A) $V$ ⚹ ∻Key Concept∻ ⚹ Quota and Surplus Reallocation ⚹ ∻Explanation∻ ⚹ A quota limits the quantity of goods, causing a shift in surplus from consumers to producers. In this case, area $V$ on the graph represents this reallocated surplus. ⚹◊What is the economic significance of surplus in the context of price controls on the market for tomato soup?⍭ Generate me a similar question◊

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