Answer the question based on the following supply and demand schedules in units per week for a product. Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be:

Question

Answer the question based on the following supply and demand schedules in units per week for a product.  Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be:

Quizplus · Accepted Answer

A price floor of $40 means that the government will guarantee that the price of the product will not fall below $40. Looking at the table, we see that at a price of $40, producers are willing to supply 500 units while consumers are willing to buy only 400 units. This means that there is a surplus of 100 units that will not be sold unless the government purchases them.

The government will have to purchase these 100 units at a cost of $40 per unit, which comes to a total of $4,000 per week (100 units x $40 per unit). Therefore, the correct answer is C) $4,000 per week.

Answer the Question Based on the Following Supply and Demand