πŸ“š Learning Guide
Price Floors in Competitive Markets
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Arrange the following steps in the correct order to analyze the effects of a price floor on the potato market: A) Evaluate the impact on producer surplus, B) Identify the equilibrium price before the price floor, C) Observe the resulting surplus and government intervention, D) Assess changes in consumer behavior due to higher prices.

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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

B β†’ A β†’ C β†’ D

B

B β†’ C β†’ A β†’ D

C

A β†’ B β†’ D β†’ C

D

B β†’ A β†’ D β†’ C

Understanding the Answer

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Answer

To analyze the effects of a price floor on the potato market, we first need to identify the equilibrium price before the price floor is set. This establishes a baseline for understanding how the price floor will impact the market. Next, we evaluate the impact on producer surplus, which helps us see how producers benefit from the higher price. After that, we assess changes in consumer behavior due to the higher prices, as consumers may buy less when prices rise. Finally, we observe the resulting surplus and any government intervention needed to manage the excess supply created by the price floor.

Detailed Explanation

First, we need to find the equilibrium price. Other options are incorrect because This option skips evaluating the equilibrium price first; This option starts with producer surplus, which comes later.

Key Concepts

Price Floors
Market Surplus
Government Intervention
Topic

Price Floors in Competitive Markets

Difficulty

medium level question

Cognitive Level

understand

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