-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 equals
A) TRPN.
B) ½(P
K)(K
W).
C) ½(P
K)(K
W)+ ½(R
K)(K
W).
D) ½(R
K)(K
W).
E) VTNM.

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 equals
A) TRPN. 
B) ½(P
K)(K
W). 
C) ½(P
K)(K
W)+ ½(R
K)(K
W). 
D) ½(R
K)(K
W). 
E) VTNM.

Quizplus · Accepted Answer

The loss of total economic surplus due to a price floor is represented by the deadweight loss, which is the sum of the two triangles: ½(PK)(KW) and ½(RK)(KW).

-Refer to the Diagram Above