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 size of the total surplus at P_F? A)area 1 + 2 + 3 B)area 1 + 2 + 3 + 4 C)area 1 + 2 + 3 + 4 + 5 D)area 1 + 2 + 3 + 4 + 5 + 6

Question

Quizplus · Accepted Answer

The total surplus at P_F is the sum of consumer surplus (area 1), producer surplus (area 2), and government revenue (area 3). There is no deadweight loss because the price floor is set above the equilibrium price. Therefore, the total surplus is equal to area 1 + area 2 + area 3, which is only represented by choice A.

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