2) Suppose that the government imposes a price floor of $40. Illustrate the price floor on the graph and recalculate the amount of consumer surplus. Evaluate the change in producer surplus.

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Author:Steven A. Greenlaw; David Shapiro
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Chapter5: Elasticity
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Referring to question 2: Suppose the government imposes a $40 price floor.  This price floor creates a market _____ in this market if it is binding.
 
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shortage
surplus
2) Suppose that the government imposes a price floor of $40. Illustrate the price floor on the
graph and recalculate the amount of consumer surplus. Evaluate the change in producer
surplus.
Transcribed Image Text:2) Suppose that the government imposes a price floor of $40. Illustrate the price floor on the graph and recalculate the amount of consumer surplus. Evaluate the change in producer surplus.
L.
Quantity
Analyzing the Effect of a Price Floor on Consumer and Producer Surplus
Price
Transcribed Image Text:L. Quantity Analyzing the Effect of a Price Floor on Consumer and Producer Surplus Price
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