Exhibit 4-8

-Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

Question

Exhibit 4-8

-Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

Quizplus · Accepted Answer

At the price floor, the quantity supplied exceeds the quantity demanded, resulting in a surplus of wheat. This surplus creates deadweight loss (area 6), which causes a loss in total surplus. The gain from the higher price paid by producers (area 1 + 2 + 3) is offset by the loss from deadweight loss (area 4 + 5). Therefore, the overall change in total surplus is a loss equal to (area 4 + 5).

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose That Wheat Producers Lobby the Wheat