Regarding price floors on milk prices,the result of a higher-than-equilibrium milk price is
A)a loss in producer surplus and a gain in consumer surplus.
B)a gain in producer surplus and a loss in consumer surplus.
C)a loss in both producer surplus and consumer surplus.
D)a gain in both producer surplus and consumer surplus.
E)no change in both producer surplus and consumer surplus.

Question

Quizplus · Accepted Answer

A price floor on milk prices set above the equilibrium price results in a surplus of milk, as the quantity supplied exceeds the quantity demanded. This surplus is absorbed by the government or the producers, often leading to wastage or storage costs. As a result, there is an increase in producer surplus due to the higher price, but a decrease in consumer surplus as the buyers have to pay higher prices for milk. Thus, a price floor on milk prices results in a gain in producer surplus and a loss in consumer surplus.

Regarding Price Floors on Milk Prices,the Result of a Higher-Than-Equilibrium