The figure to the right shows the market for product X Suppo

The figure to the right shows the market for product X. Suppose the government decides to impose a price floor at a price of $40. The quantity exchanged will be A Price Floor A. 25 units. B. 10 units. C. 40 units. D. 15 units. E. 35 units. ?? Quantity

Solution

(1) Option (B)

When floor price = $40, quantity demanded = 10 and quantity supplied = 40. Since firms can sell only what consumers will buy, relevant quantity exchanged is 10 units.

(Second image is replica of first image, which is answered.)