Questions: The diagram to the right shows a market in which a price floor has been imposed. Identify the following (enter all values as integers). a. The deadweight loss is b. The transfer of consumer surplus to producers is c. Producer surplus with this price floor is d. Consumer surplus with this price floor is

Solution Steps

The deadweight loss is the area of the triangle formed by the price floor, the supply curve, and the demand curve. This area is represented by the triangle CDE.

The transfer of consumer surplus to producers is the area between the original equilibrium price and the price floor, up to the quantity demanded at the price floor. This area is represented by the rectangle BC.

Producer surplus with the price floor is the area above the supply curve and below the price floor, up to the quantity supplied at the price floor. This area includes the rectangle BC and the triangle A.

Final Answer