Consider the market for pulp and paper.Suppose,in an attempt to help this industry,the government sets a price floor above the free- market equilibrium price.The result will be

Question

Quizplus · Accepted Answer

When the government sets a price floor above the free-market equilibrium price, the price floor becomes the new minimum price that sellers can legally charge. As a result, the quantity supplied of pulp and paper will exceed the quantity demanded, creating a surplus in the market. This is because the higher price discourages some buyers from purchasing, while encouraging more sellers to enter the market.

Consider the Market for Pulp and Paper