Suppose the government introduced a ceiling on lawyers' fees
How would the amount of work done by lawyers, the consumer surplus of people who hire lawyers, and the producer surplus of law firms change? Would this fee ceiling result in an efficient and fair use of resources? Why or why not?
If the ceiling is set above the equilibrium fee, the ceiling has no effect on the amount of work, consumer surplus, or producer surplus. The market remains efficient.
If the ceiling is set below the equilibrium fee, the quantity of work supplied decreases. There is a shortage and increased search. The consumer surplus decreases and the law firms' producer surplus decreases. This ceiling results in an inefficient use of resources. The marginal benefit exceeds the marginal cost and a deadweight loss arises. Additionally, added resources are used as people increase their search activity to find an attorney. It also is unfair, by the "fair rules" view because it blocks voluntary exchange and by the "fair results" view unless the allocation mechanism allocates more law firm resources to poorer people, which is unlikely.
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