Exhibit 16.2

-Refer to Exhibit 16.2,which shows the market for milk.Suppose the government introduces a variety of policies that set floor prices for milk at $3.Without government intervention,the market price of milk would average $2 per gallon for a market quantity of 100 million gallons per month.Triangle abc represents the consumer surplus at the support price.

Question

Exhibit 16.2
 
-Refer to Exhibit 16.2,which shows the market for milk.Suppose the government introduces a variety of policies that set floor prices for milk at $3.Without government intervention,the market price of milk would average $2 per gallon for a market quantity of 100 million gallons per month.Triangle abc represents the consumer surplus at the support price.

Quizplus · Accepted Answer

Triangle abc represents the consumer surplus at the support price, which means that there is a gain in consumer surplus due to the introduction of the floor price. This gain would not exist if the market price was already at or above the floor price. Therefore, the statement is true.

Exhibit 16.2 -Refer to Exhibit 16.2,which Shows the Market for Milk.Suppose the Market