Regarding price floors on prices, the result of a higher-than-equilibrium market price is
A)a loss in producer surplus and a gain in consumer surplus.
B)a gain in producer surplus and a loss in consumer surplus.
C)a loss in both producer surplus and consumer surplus.
D)a gain in both producer surplus and consumer surplus.
E)no change in both producer surplus and consumer surplus.

Question

Quizplus · Accepted Answer

A price floor is set above the equilibrium price which results in a surplus of supply. This means that there will be a gain in producer surplus as they are able to sell all their goods at the higher price set by the floor. However, consumers are not willing to buy the same quantity of goods at the higher price, so there will be a loss in consumer surplus as they have to pay more for the same product. Therefore, the answer is B: a gain in producer surplus and a loss in consumer surplus.

Regarding Price Floors on Prices, the Result of a Higher-Than-Equilibrium