Answer: B. A price ceiling will always decrease producer surplus.
A. A price floor will always increase producer surplus
E. A price ceiling will always increase social welfare.
Explanation: Price floor is a term used in economics to describe the legal minimum price of a product below which no producer or manufacturer is expected to sale, it is usually set by regulatory bodies above the Equilibrium price level. PRICE FLOOR INCREASES PRODUCERS SURPLUS.
Price ceiling is a term used to describe the legal maximum price above which a particular product or service can not be rendered in an economy.
PRICE CEILING IS AIMED AT REDUCING PRODUCER SURPLUS AND IMPROVE SOCIAL WELFARE.
Answer: A Price floor will always increase producer surplus.
Explanation:
Price controls are measures put in place by the government to regulate the prices of goods and services. There are two types of price controls, namely; Price ceiling and Price floor.
The price ceiling ensures that the price of a commodity does not increase above a certain limit. The price floor, on the other hand, ensures that the price of a commodity does not decrease below a certain limit.
The Price floor will always increase producer surplus. An example is the minimum wage. While it improves the income of employed workers, it also has the tendency to cause unemployment because employers may not afford to pay the minimum wage for a large workforce. However, Suppliers (in this case potential workers) would be more inclined to supply their services at the price floor.
