Figure 9.3.1
-Refer to Figure 9.3.1. If the government establishes a price floor of $40 and purchases the surplus, total consumer and producer surplus will be:
A) $15.
B) 30 widgets.
C) $1,050.
D) $1,200.
E) $1,350.

Question

Figure 9.3.1
-Refer to Figure 9.3.1. If the government establishes a price floor of $40 and purchases the surplus, total consumer and producer surplus will be:
A) $15. 
B) 30 widgets. 
C) $1,050. 
D) $1,200. 
E) $1,350.

Quizplus · Accepted Answer

A price floor set above the equilibrium price creates a surplus. The government purchasing this surplus at the price floor increases producer surplus. Total surplus is the sum of consumer and producer surplus, which is maximized when the government intervenes to purchase the surplus, leading to a total surplus of $1,350.

Figure 9.3.1 -Refer to Figure 9.3.1. If the Government Establishes a Price