Question

1)How can a price floor reduce the total surplus? Show it graphically.

1)How can a price floor reduce the total surplus? Show it graphically.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Price floor is imposed above the equilibrium price. In the above diagram, equilibrium price is P*, price floor is Pf.

Before Price floor:

  • Consumer surplus is area of portion B + C + E
  • Producer surplus is area of portion D + F
  • Total surplus is area of portion B + C + E + D + F

After Price Floor:

  • Consumer surplus is area of portion B
  • Producer surplus is area of portion C + D
  • Deadweight loss is area of portion E + F
  • Total surplus is area of portion B + C + D

Thus, there is fall in total surplus equal to area deadweight loss which is area of portion E + F.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1)How can a price floor reduce the total surplus? Show it graphically. 2. This is Philippine's...
1)How can a price floor reduce the total surplus? Show it graphically. 2. This is Philippine's real GDP (in thousands of pesos) for 2008 to 2011. Find nominal GDPs for each year: Year GDP at Constant Price Deflator Nominal GDP 2008                       319,728 169.2413 2009                       374,841 168.8164 2010                       386,930 193.0217 2011                       420,485 213.126 3. You are provided below Philipines GDP (in thousands of pesos) for 2015 to 2018. a. Calculate real GDP and GDP growth: Year GDP...
If a price floor benefits producers, why does a price floor reduce surplus?
If a price floor benefits producers, why does a price floor reduce surplus?
Subsidies are most likely to: reduce total economic surplus. reduce consumer surplus. leave total economic surplus...
Subsidies are most likely to: reduce total economic surplus. reduce consumer surplus. leave total economic surplus unchanged, but transfer surplus from producers to consumers. increase total economic surplus.
a. Show on a demand supply graph how consumer surplus and producer surplus is defined. b....
a. Show on a demand supply graph how consumer surplus and producer surplus is defined. b. In general to evaluate welfare effects we need to consider the welfare of groups of individuals. What problem does consumer surplus pose in this regard? c. There are two firms in an economy facing a upward sloping supply curve in a perfectly competitive setting. Show graphically how you would nd the total producer surplus in the economy.
Question 1 1.1. If a price floor were imposed on a competitive market, what would be...
Question 1 1.1. If a price floor were imposed on a competitive market, what would be the effect on the producer surplus and total economic surplus areas? (Use a typical demand-supply curve diagram in your answer.) 1.2. Explain why the slope of the demand curve is important to determining the effect of the price floor on the change in the size of consumer surplus area. (You can use a diagram if you wish.) 1.3. Describe a situation where you think...
How can you find producer surplus, consumer surplus, total surplus in a oligopoly? Also provide a...
How can you find producer surplus, consumer surplus, total surplus in a oligopoly? Also provide a graphical explanation.
1. Show graphically how imposing a tariff on Chinese imports (say steel) can increase domestic U.S....
1. Show graphically how imposing a tariff on Chinese imports (say steel) can increase domestic U.S. production and employment, but a production subsidy can achieve the same goal with less domestic economic welfare loss? 2. Show graphically in the large country case, how trade intervention in the form of imposing a tariff on Chinese imports (say garment) can lead to an economic welfare gain in the U.S?
2. The Department of Agriculture maintains a price floor for tobacco farmers, which raises the price...
2. The Department of Agriculture maintains a price floor for tobacco farmers, which raises the price of tobacco above equilibrium price. (9 points) a. Draw the market demand and supply curves for tobacco before implementation of the price floor. Label the equilibrium price and quantity. b. On the same graph depict the price floor, the resulting surplus or shortage of tobacco. c. On the same graph show the reduction in consumer surplus as a result of the price floor policy.
b.) Graph and briefly explain/show if statements are true or false: An effective price floor is...
b.) Graph and briefly explain/show if statements are true or false: An effective price floor is expected to create a shortage in a market; but an effective price ceiling is expected to create a surplus in a market. (Need two separate sketches to answer this.) Show the DWL, and the new consumer and producer surpluses on your graphs (sketches).
MC(q)= 17+q, where price is $29.00. Illustrate graphically. A. Find output B. Calculate the producer surplus...
MC(q)= 17+q, where price is $29.00. Illustrate graphically. A. Find output B. Calculate the producer surplus for this firm. C. Where is the profit maximization point?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT