Exhibit 7-6
-Refer to Exhibit 7-6. If the market is in equilibrium and then the government imposes a price floor equal to P₁, sellers lose producer surplus equal to area ____, but gain producer surplus equal to area ____.

Question

Exhibit 7-6 Exhibit 7-6 -Refer to Exhibit 7-6. If the market is in equilibrium and then the government imposes a price floor equal to P<sub>1</sub>, sellers lose producer surplus equal to area ____, but gain producer surplus equal to area ____. A) E + F; B B) F; C C) F; B D) E; C

Exhibit 7-6 -Refer to Exhibit 7-6. If the market is in equilibrium and then the government imposes a price floor equal to P<sub>1</sub>, sellers lose producer surplus equal to area ____, but gain producer surplus equal to area ____. A) E + F; B B) F; C C) F; B D) E; C

-Refer to Exhibit 7-6. If the market is in equilibrium and then the government imposes a price floor equal to P₁, sellers lose producer surplus equal to area ____, but gain producer surplus equal to area ____.

Quizplus · Accepted Answer

When a price floor is imposed, the new equilibrium price becomes PS1, which is above the original equilibrium price. As a result, the quantity demanded decreases and the quantity supplied increases, which leads to a surplus of goods. The area of the surplus is represented by area F.

Since the price floor is above the original equilibrium price, sellers gain producer surplus equal to the shaded triangle above PS1 and below U1B0, which is represented by area B.

However, some sellers who were previously willing to supply at the original equilibrium price may no longer be willing to supply at the higher price floor. This results in a decrease in producer surplus, represented by the shaded triangle above PS1 and below S1U1, which is equal to area F.

Therefore, the correct answer is C, as sellers lose producer surplus equal to area F, but gain producer surplus equal to area B.

​Exhibit 7-6 -Refer to Exhibit 7-6. If the Market Is in Equilibrium

Exhibit 7-6 -Refer to Exhibit 7-6. If the Market Is in Equilibrium