Consider the market for sugar illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p2 and a quantity of Q2. Now suppose the government applies a price floor of p3. Compared with the market-clearing equilibrium, consumer surplus would A P3 O A. decrease by area B. O B. decrease by areas B and E. OC. decrease by areas B and F. O D. decrease by area E. O E. increase by area C. G E P2 P1 D D Q2 Q3 Quantity of sugar ..... B. Price of sugar .....
Consider the market for sugar illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p2 and a quantity of Q2. Now suppose the government applies a price floor of p3. Compared with the market-clearing equilibrium, consumer surplus would A P3 O A. decrease by area B. O B. decrease by areas B and E. OC. decrease by areas B and F. O D. decrease by area E. O E. increase by area C. G E P2 P1 D D Q2 Q3 Quantity of sugar ..... B. Price of sugar .....
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider the market for sugar illustrated in the figure to the right. Suppose the
market is perfectly competitive and initially in equilibrium at a price of p2 and a
quantity of Q2.
Q
Now suppose the government applies a price floor of p3. Compared with the
market-clearing equilibrium, consumer surplus would
A
P3
O A. decrease by area B.
O B. decrease by areas B and E.
O C. decrease by areas B and F.
B
G
E
P2
O D. decrease by area E.
P1
O E. increase by area C.
Q2
Q3
Quantity of sugar
Price of sugar
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