Consider a market with a price floor above the equilibrium price.A rightward shift of the demand curve will likely ________.

Question

Quizplus · Accepted Answer

A rightward shift of the demand curve will increase both the equilibrium price and quantity traded. If the price floor is still above the new equilibrium price, the market will still be inefficient and result in a deadweight loss. However, the shift in demand will alleviate some of the excess supply and increase the quantity traded, ultimately moving the market closer to efficiency. Therefore, C is the best choice.

A is incorrect because a rightward shift of the demand curve should decrease deadweight loss.

B is incorrect because a rightward shift of the demand curve should increase both price and quantity traded.

D is incorrect because a rightward shift of the demand curve should increase producer surplus.

Consider a Market with a Price Floor Above the Equilibrium