The welfare loss due to a price floor
A)is caused by a decrease in quantity
B)is the dollar difference between producer surplus and consumer surplus
C)is measured as the area above the market price and below the demand curve
D)is measured as the area above both the market price and the supply curve
E)is a Pareto improvement

Question

Quizplus · Accepted Answer

A price floor leads to a decrease in quantity traded in the market, causing a welfare loss due to the inefficient allocation of resources.

The Welfare Loss Due to a Price Floor