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

question 92

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 normative analysis would conclude that:

• A) the policy was effective, since surplus gained by producers through higher prices is greater than the surplus they lost through deadweight loss.
• B) the policy was ineffective, since surplus gained by producers through higher prices is greater than the surplus they lost through deadweight loss.
• C) the policy was effective, since surplus gained by producers through higher prices is greater than the surplus lost by consumers through higher prices.
• D) there is no "right" conclusion to be reached in a normative sense, since people have different opinions concerning what constitutes a better outcome.

---

Definitions:

Personal Income Tax

A tax levied on the taxable income of individuals, households, and unincorporated firms.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes, determined by subtracting allowable deductions from gross income.

Deductions

Expenses that can be subtracted from gross income to determine taxable income, thereby potentially reducing the amount of taxes owed.

Exemptions

Provisions in tax law that allow taxpayers to reduce their taxable income, often for specific activities or investments.