-Refer to the diagram above.Assume that a price floor is imposed at point V,i.e. ,the price is now represented by the distance 0V,and that the government vows to purchase any excess supply.The value of the loss of total economic surplus due to the price floor measures the
A) trades that would have occurred,but do not because of the price floor.
B) extra profit firms earn because of the price floor.
C) extent to which the cost of producing QaQc units exceeds the benefit of consuming QaQc units.
D) extra revenue firms receive because of the price floor.
E) extent to which the cost of producing QaQc units is exceeded by the benefit of consuming QaQc units.

Question

-Refer to the diagram above.Assume that a price floor is imposed at point V,i.e. ,the price is now represented by the distance 0V,and that the government vows to purchase any excess supply.The value of the loss of total economic surplus due to the price floor measures the
A) trades that would have occurred,but do not because of the price floor. 
B) extra profit firms earn because of the price floor. 
C) extent to which the cost of producing QaQc units exceeds the benefit of consuming QaQc units. 
D) extra revenue firms receive because of the price floor. 
E) extent to which the cost of producing QaQc units is exceeded by the benefit of consuming QaQc units.

Quizplus · Accepted Answer

The loss of total economic surplus due to the price floor measures the extent to which the cost of producing QaQc units exceeds the benefit of consuming QaQc units.

-Refer to the Diagram Above