Question

Which of the following will cause an increase in consumer surplus?A. the imposition of a binding price floor in the marketB. a decrease in the number of sellers of the goodC. a technological improvement in the production of the goodD. an increase in the production cost of the good

Answer 1

Answer:

The correct answer is option A.

Explanation:

Consumer surplus can be defined as the difference between maximum price a consumer is willing to pay and the market price.

A binding floor refers to the price floor that is set below the equilibrium market price.

A price floor below the equilibrium market price will increase the difference between the maximum price the consumer is willing to pay and the price it has top actually pay.

Thus, it increases the consumer surplus.