If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkin farmers in Minnesota.

Question

Quizplus · Accepted Answer

A price floor set above the market-clearing price would create a surplus of pumpkins, indicating an oversupply. This would lead to an inefficient number of pumpkin farmers in Minnesota because too many farmers would be incentivized to enter the market, potentially driving down prices and creating a larger surplus.

If the State of Minnesota Established a Price Floor in the Market