Quiz: SLO 5 Taxation/Forms of Government (Copy) Time Remaining 02 This Question:

Question

Quiz: SLO 5 Taxation/Forms of Government (Copy) Time Remaining 02 This Question: 1 pt 4 of 7 (6 complete) This Q Consider the market for sugar illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p2 and a quantity of Q2 Now suppose the government applies a price floor of p3. Compared with the market-clearing equilibrium, consumer surplus would 0 A. decrease by areas B and E. O B. decrease by area B. C. decrease by areas B and F. O D. decrease by area E. O E. increase by area C. In turn, producer surplus would P1 O A. increase by area B O B. decrease by area C. C. increase by area B and decrease by area F O D. increase by areas B, E, and G O E. increase by areas B and E Consequently, with the price floor, deadweight loss would equal Quantity of sugar Click to select your answer

Explanation / Answer

Answer:

1. A. Decrease by area B and E. The surplus area B is transferred to the producer and area E is deadweight loss.

2.A. Increase by area B. This is transferred from consumer to producer and area F becomes deadweight loss.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.