With a price floor, producer surplus will always increase.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price that is higher than the equilibrium price. This means that it creates a situation where the quantity supplied exceeds the quantity demanded, leading to a surplus. While some producers may benefit from the higher price, many will be unable to sell their goods at the mandated price and may experience a decrease in surplus or even losses. Therefore, producer surplus may not always increase with a price floor. While a price floor may increase producer surplus in some cases, it will only do so if the price floor is set above the equilibrium price. If the price floor is set too high, it can lead to a surplus of supply and a decrease in producer surplus. Additionally, a price floor may lead to inefficiencies in the market, such as a reduction in consumer surplus and deadweight loss. Therefore, the statement that "with a price floor, producer surplus will always increase" is false.

With a Price Floor, Producer Surplus Will Always Increase