If the Intended Aim of the Price Floor Set at $23

question 2

Multiple Choice

If the intended aim of the price floor set at $23, as shown in the graph, was a net increase in the well-being of producers, then positive analysis would have us consider whether:

• A)the surplus transferred from producers to consumers is greater than the consumer surplus lost due to fewer transactions taking place.
• B)the surplus transferred from consumers to producers is greater than the consumer surplus lost due to fewer transactions taking place.
• C)the producer surplus lost due to fewer transactions taking place is greater than the producer surplus gained from a higher price.
• D)the producer surplus lost due to lower prices is greater than the producer surplus lost due to fewer transactions taking place.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, and typically pays dividends before common stock.

Common Stock

Shares of ownership in a corporation that entitle the shareholder to vote at shareholder meetings and receive dividends.

Beta

An indicator of how much a stock's price fluctuates in comparison to the general market.

Treasury Bills

Government-issued securities sold below their nominal value, with maturity periods of no more than a year.