A price floor, when set above the equilibrium price, leads to a surplus because the quantity supplied exceeds the quantity demanded at that price. This does not necessarily result in a shortage; rather, it prevents the market from clearing, causing excess supply.

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A Price Floor

Question 132

Multiple Choice

A price floor

A) always results in a surplus.
B) results in a surplus if the floor price is higher than the equilibrium price.
C) results in a shortage if the floor price is higher than the equilibrium price.
D) always results in a shortage.

Correct Answer: