Refer to the accompanying figure. If the government has a budget of $300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed?
A) $1
B) $2
C) $3
D) $4
E) $5

Question

Refer to the accompanying figure. If the government has a budget of $300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed? 
A) $1 
B) $2 
C) $3 
D) $4 
E) $5

Quizplus · Accepted Answer

The maximum possible floor price is determined by the point where the supply curve intersects with the budget line. In this case, the intersection point is at a quantity of 100,000 bottles and a price of $3 per bottle. This means that if the government sets a floor price of $3 or lower, they will be able to purchase the entire surplus quantity with their budget of $300,000. Setting a higher floor price would result in a smaller quantity being purchased, as the price would exceed the budget.

Refer to the Accompanying Figure