Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:
A) cause a surplus of corn.
B) cause a shortage of corn.
C) have no effect on the price of corn.
D) increase the supply of corn.

Question

Quizplus · Accepted Answer

A price floor set above the current market price will lead to a surplus because the minimum price is higher than what consumers are willing to pay, resulting in excess supply.

Suppose the Government Sets a Price Floor of $2