QUESTION 1. Consider a market which is initially in equilibrium. Suppose the government decides to impose a price ceiling, which would force firms to sell their product at a price below the equilibrium price.

A) What will be the effect of this price ceiling on the total quantity sold?

B) How are the producer surplus and the consumer surplus affected?

C) Does the price ceiling affect all consumers the same way? Explain.

D) Is the new situation efficient? Explain.