Question

true or false:

1. Agricultural price supports are a price floor that has little to no cost to consumers.

2. Say that equilibrium price is $10.

“A price floor of $12 will be binding (i.e. have an impact on the price consumers pay)."

3. With linear supply and demand curves and in the absence of price ceilings/floors, consumer and producer surplus will be triangles. Thus the formula for the area of a triangle (1/2 x base x height) is useful to calculate CS and PS.

Answer 1

. Agricultural price supports are a price floor that has little to no cost to consumers.- True, it is set above the equilibrium prices, that the government is willing o pay in exchange for buying agricultural produce of the farmers. It does have a little impact on consumers.

Say that equilibrium price is $10.

“A price floor of $12 will be binding (i.e. have an impact on the price consumers pay)." - True, it affects consumers.

With linear supply and demand curves and in the absence of price ceilings/floors, consumer and producer surplus will be triangles. Thus the formula for the area of a triangle (1/2 x base x height) is useful to calculate CS and PS.- True, that formula will be applied to calculate consumer and producer surplus, where height will be the equilibrium quantity and base will be prices which are represented on the Y axis.