Suppose that a minimum price (price floor) is legislated. To calculate producer surplus:
A) integrate the area below the price floor and above the supply curve between zero and the free-market equilibrium price.
B) integrate the area below the price floor and above the supply curve between zero and the quantity resulting from the price floor.
C) integrate the area under the demand curve and above the price floor between zero quantity and the quantity resulting from the price floor.
D) integrate the area under the demand curve and above the supply curve between zero quantity and the quantity resulting from the price floor.

Question

Quizplus · Accepted Answer

Producer surplus is calculated by integrating the area below the price floor and above the supply curve from zero to the quantity resulting from the price floor. This area represents the difference between what producers are willing to accept for their goods and the higher price they actually receive due to the price floor.

Suppose That a Minimum Price (Price Floor) Is Legislated