Suppose the market in Figure 9.3.1 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will:

A) fall by $50.
B) fall by $350.
C) remain the same.
D) rise by $50.
E) rise by $350.

Question

Fiona Cheung · Accepted Answer

Final Answer : B, Explanation :  With a price floor of $40, the quantity supplied increases to 120 while the quantity demanded falls to 80. This leads to a surplus of 40 units. The consumer surplus reduces significantly from the original value of $500 to $150. Therefore, consumer surplus will fall by $350.

Suppose the market in Figure 9.3.1 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will:

A) fall by $50.
B) fall by $350.
C) remain the same.
D) rise by $50.
E) rise by $350.

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Learning Objectives

Related questions

Suppose the market in Figure 9.3.1 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will:A) fall by $50.B) fall by $350.C) remain the same.D) rise by $50.E) rise by $350.

Definitions

Learning Objectives

Learning Objectives

Related questions

Suppose the market in Figure 9.3.1 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will:

A) fall by $50.
B) fall by $350.
C) remain the same.
D) rise by $50.
E) rise by $350.