P2 P1 Q1 Q2 Q3 Quantity of computers/time 26. In figure 3, an effective price fl
ID: 1134133 • Letter: P
Question
P2 P1 Q1 Q2 Q3 Quantity of computers/time 26. In figure 3, an effective price floor would be: a. zero b. P1 C. P2 d. all of the above e. none of the above 27. In figure 3 in the effective price floor causes: a. supply to equal demand b. excess quantity supplied c. excess quantity demanded d. all of the above e. none of the above 28. In figure 3 in equilibrium producer surplus is: a. X b. X+Y+Z C. CHE d. C e. none of the above ! 29. In figure 3, with the price floor consumer surplus is: a. X d. e. none of the above C. C+E 30. In figure 3, with the price floor the dead weight loss is at least: a. A d. F e. none of the aboveExplanation / Answer
26. C P2 Price floor. This is the minimum price that is proposed by the Government. To be effective, the price floor must be above equilibrium price.
27 B Excess quantity supplied. Quantity supplied is Q3 and quantity demanded is Q1 at price P2, so the excess quantity supplied is Q3-Q1.
28 C. C+E. The area of producer surplus is the area above the supply curve and below the market price, which is P1. It is the difference between what producers get and what is the minimum price at which they are willing to sell.
29 A. Consumer surplus is the area below demand curve and above market price. It is the difference between what consumers are willing to pay and what they actually pay. It is the area X in the graph.
30 B. Z + E. The optimal quantity is Q1, after the imposition of price floor the output is Q2. The areas Z + E is the deadweight loss.
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