The government imposes a restriction on firms that shifts the supply curve in Figure 9.3 so that it intersects the demand curve at e2. Discuss the effects on CS, PS, welfare, and DWL.
Figure 9.3 Why Reducing Output from the Competitive Level Lowers Welfare

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Supply P2 в MC, = P1 Demand MC; Q, Q, Units per year Competitive Output, Q (1) Smaller Output, Q2 (2) Change (2)-(1) Consumer Surplus, CS Producer Surplus, PS -B- C= ACS A+B+C B- E= APS B+D A+B+ C+D+ E Welfare, W = CS + PS -C- E= AW= DWL A +B+D P, $ per unit Ц