Figure 9.3.2
-Refer to Figure 9.3.2 above. If the government establishes a price floor of $2.50, consumer surplus will:
A) fall by $50.
B) fall by $150.
C) remain the same.
D) rise by $50.
E) rise by $150.

Question

Figure 9.3.2
-Refer to Figure 9.3.2 above. If the government establishes a price floor of $2.50, consumer surplus will:
A) fall by $50. 
B) fall by $150. 
C) remain the same. 
D) rise by $50. 
E) rise by $150.

Quizplus · Accepted Answer

With a price floor of $2.50, the new equilibrium price will be $3.50. This means that quantity demanded will fall from 40 to 30, resulting in a decrease in consumer surplus of (1/2) x (10) x (4 - 3.5) x (30 + 40) = $150.

Figure 9.3.2 -Refer to Figure 9.3.2 Above. If the Government Establishes a Establishes