Figure 6-4

-Refer to Figure 6-4.Suppose a price floor of $7.00 is imposed.As a result,

Question

Figure 6-4
 
-Refer to Figure 6-4.Suppose a price floor of $7.00 is imposed.As a result,

Quizplus · Accepted Answer

The price floor of $7.00 is above the equilibrium price of $6.00. At a price of $7.00, the quantity supplied is 60 units and the quantity demanded is 20 units. Therefore, there is a surplus of 40 units. The government must purchase these 40 units in order to maintain the price floor. The government's expenditure on these units is $7.00 per unit, or a total of $280.00. However, consumers only spend $140.00 on the 20 units that they purchase. Therefore, buyers' total expenditure on the good decreases by $20.00.

Figure 6-4 -Refer to Figure 6-4.Suppose a Price Floor of $7.00 Is