Figure 7-15

-Refer to Figure 7-15.If the government imposes a price floor of $60 in this market,then total surplus will be
A) $110.50.
B) $125.00.
C) $187.50.
D) $225.25..

Question

Figure 7-15
 
-Refer to Figure 7-15.If the government imposes a price floor of $60 in this market,then total surplus will be
A) $110.50. 
B) $125.00. 
C) $187.50. 
D) $225.25..

Quizplus · Accepted Answer

At the price floor of $60, the quantity demanded will be 7 units and the quantity supplied will be 4 units. The total surplus is the sum of consumer surplus and producer surplus. Consumer surplus is the area below the demand curve and above the price floor, which is (1/2)(60-30)(7-0) = $105. Producer surplus is the area above the supply curve and below the price floor, which is (1/2)(60-20)(4-0) = $80. Therefore, total surplus is $105 + $80 = $187.50.

Figure 7-15 -Refer to Figure 7-15.If the Government Imposes a Price Floor