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

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.

SUSHMA CHAUDHARY · Accepted Answer

Final Answer : B, Explanation :  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.

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.

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