In the case of a price floor,
A)there will be a shortage.
B)there is no need for government to buy any excess.
C)government must require producers to increase production to meet demand.
D)there is a redistribution of income from consumers to producers.
E)supply decreases.

Question

Quizplus · Accepted Answer

A price floor set above the equilibrium price leads to a surplus, not a shortage, as it sets a minimum price that is higher than what the market would naturally set. This benefits producers by allowing them to sell at a higher price, leading to a redistribution of income from consumers, who pay more, to producers.

In the Case of a Price Floor