The following figure depicts the market for a certain good.

-Refer to the figure above.For what price would a price floor policy create a deadweight loss of $10?

Question

The following figure depicts the market for a certain good.
 
-Refer to the figure above.For what price would a price floor policy create a deadweight loss of $10?

Quizplus · Accepted Answer

A price floor set above the equilibrium price creates a surplus by preventing the price from falling to its equilibrium level where supply equals demand. In this scenario, a price floor at $6 would create a deadweight loss of $10, as it would lead to overproduction and underconsumption compared to the equilibrium outcome, thus causing inefficiency in the market.

The Following Figure Depicts the Market for a Certain Good