If the Intended Aim of the Price Floor Set in the Graph

question 55

Multiple Choice

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

• A) whether the surplus transferred from producers to consumers is larger than the consumer surplus lost to deadweight loss.
• B) whether the surplus transferred from consumers to producers is larger than the consumer surplus lost to deadweight loss.
• C) whether the producer surplus lost to deadweight loss is greater than the producer surplus gained from a higher price.
• D) whether 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:

Treasury Stock

Shares that were once part of the outstanding shares of a company but were later reacquired by the company itself.

Deferred Tax Asset

A tax reduction or benefit that arises due to temporary differences between the book value and tax value of assets and liabilities, which can be used to offset future tax liabilities.

Income Taxes Payable

The amount of income tax a company owes to the government but has not yet paid, usually accumulated over a financial period.

Income Tax Expense

The amount of money a company owes in taxes based on its taxable income.