Figure 9.3.2
-Refer to Figure 9.3.2 above. If the government establishes a price floor of $2.50 and farmers grow only the amount of berries that will be sold, the resulting deadweight loss will be:
A) $1.50.
B) 200 pounds of berries.
C) $150.
D) $250.
E) $300.

Question

Figure 9.3.2
-Refer to Figure 9.3.2 above. If the government establishes a price floor of $2.50 and farmers grow only the amount of berries that will be sold, the resulting deadweight loss will be:
A) $1.50. 
B) 200 pounds of berries. 
C) $150. 
D) $250. 
E) $300.

Quizplus · Accepted Answer

The deadweight loss is represented by the triangle with base 300 pounds and height $1.50, so the area is (1/2) x 300 x $1.50 = $225. Therefore, the deadweight loss from the price floor of $2.50 is $225 - the difference between the equilibrium price of $1.00 and the price floor. Thus, the resulting deadweight loss will be $225 - $75 = $150.

Figure 9.3.2 -Refer to Figure 9.3.2 Above. If the Government Establishes a Establishes