The diagram illustrates the sugar market, which is first at equilibrium with a price of OP. A government then sets a maximum price at OP1. What will be the outcome?
- Aa reduction in farmers’ revenue equal to PRSP1
- Bexpenditure on sugar will be equal to PRMO
- Cfarmers’ revenue would be P1UNO
- Dproducer surplus will be P1SP2