Suppose That a Minimum Price (Price Floor) Is Legislated

question 142

Multiple Choice

Suppose that a minimum price (price floor) is legislated. To calculate producer surplus:

• A) integrate the area below the price floor and above the supply curve between zero and the free-market equilibrium price.
• B) integrate the area below the price floor and above the supply curve between zero and the quantity resulting from the price floor.
• C) integrate the area under the demand curve and above the price floor between zero quantity and the quantity resulting from the price floor.
• D) integrate the area under the demand curve and above the supply curve between zero quantity and the quantity resulting from the price floor.

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Definitions:

Zero Marginal Cost

The situation when producing an additional unit of a good or service does not increase the total cost of production, often associated with digital products or services.

Pushcart

A small cart or wheeled vehicle typically used by vendors for selling goods in public places.

Output

The quantity of goods or services produced in a given period of time by a firm, industry, or country.

Inverse Demand

A conceptual representation showing the relationship between the price of a good and the quantity demanded, expressed with price as a function of quantity.