Price $45 50 Quantity Demanded 350 300 250 200 150 100 Quantity Supplied 0 60 65

Question

Price $45 50 Quantity Demanded 350 300 250 200 150 100 Quantity Supplied 0 60 65 70 50 100 150 200 Refer to the table above. If the market is originally in equilibrium and a price floor of $50 is imposed, which of the following is true? Net surplus in the economy will decrease. Producer surplus will decrease. Demand will increase Consumers will purchase less than they would at the equilibrium price. E. None of the above is true. Refer to the table above. If a price floor of $70 is imposed 200 units will be sold. a surplus will result equal to 100 units. a shortage will result equal to 200 units the price will be below the equilibrium price. none of the above answers are correct. D.

Explanation / Answer

Answer
The price floor is binding if the price is above equilibrium price
the equilibrium is at Qd=Qs
where
P=65
the price floor is below equilibrium price so it is not effective and do nothing in the market
Option E

Q2
The price floor is effective because it is above equilibrium price
where
Qd=100 and Qs=200
the surplus=200-100=100 units
Option B

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