This graph shows the market for fried bologna sandwiches.

What area(s) depict consumer surplus if a binding price floor is imposed on this market?

Choose 1 answer:
(A) $T$
(B) $X$
(C) $Y$
(D) $U$
(६) $W$

Question

This graph shows the market for fried bologna sandwiches.

What area(s) depict consumer surplus if a binding price floor is imposed on this market?

Choose 1 answer:
(A) $T$
(B) $X$
(C) $Y$
(D) $U$
(६) $W$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Consumer Surplus: Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. ‖ ‖ b ⋮ Impact of a Price Floor: A price floor set above the equilibrium price creates a surplus in the market, as the quantity supplied exceeds the quantity demanded. This leads to a reduction in consumer surplus. ‖ ‖ c ⋮ Identifying Consumer Surplus on the Graph: Before the price floor, consumer surplus is the area under the demand curve and above the equilibrium price. After the price floor is imposed, consumer surplus is the area under the demand curve and above the price floor. ‖ ‖ d ⋮ Analyzing the Given Options: Given the description of the graph, the area that represents consumer surplus after a binding price floor is imposed would be above the price floor and below the demand curve, up to the quantity demanded at the price floor. ‖ ∻Answer∻ ⚹ (A) $T$ ⚹ ∻Key Concept∻ ⚹ Consumer Surplus After Price Floor ⚹ ∻Explanation∻ ⚹ Consumer surplus is the area below the demand curve and above the price after a binding price floor is set; it is reduced compared to the surplus at equilibrium. ⚹◊How would a binding price floor impact the consumer surplus in the market for fried bologna sandwiches?⍭ Generate me a similar question◊

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