Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of producer surplus after the imposition of the price floor?

Question

Figure 4-6  Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of producer surplus after the imposition of the price floor?

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the price floor. In this case, the price floor is $12, and the supply curve is a straight line with a slope of 1. The equilibrium quantity is 300 units, and the equilibrium price is $10. The producer surplus is the area of the triangle with a base of 300 units and a height of $2 ($12 - $10). The area of a triangle is (1/2) * base * height, so the producer surplus is (1/2) * 300 * 2 = $3,000.

Figure 4-6 Figure 4-6 Shows the Demand and Supply