Figure 9.3.1
-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

Figure 9.3.1
-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.

Quizplus · Accepted Answer

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.

Figure 9.3.1 -Suppose the Market in Figure 9.3.1 Is Currently in Equilibrium