Suppose that the government sets a price floor in the market for milk at $2.15 per gallon of milk.If the equilibrium price of milk is $1.99,the result of the price floor will be a _____________ of milk and ____________ exchanges will be made with the price floor than would be made in a free market.
A) shortage; fewer
B) surplus; fewer
C) shortage; more
D) surplus; more

Question

Quizplus · Accepted Answer

A price floor set above the equilibrium price leads to a surplus because suppliers are willing to supply more at the higher price than consumers are willing to buy. Fewer exchanges are made because the price is too high for some consumers, reducing the quantity demanded.

Suppose That the Government Sets a Price Floor in the Market