A price floor that is set above the equilibrium price
A)causes suppliers to lose money.
B)creates a shortage.
C)is non-binding.
D)creates a surplus.

Question

Quizplus · Accepted Answer

A price floor that is set above the equilibrium price creates an excess supply or surplus, as the quantity supplied by the sellers exceeds the quantity demanded by the buyers. The suppliers are willing to sell more at the higher price, but the buyers are not willing to buy as much at the higher price, leading to a situation of excess supply. This can lead to inefficiencies in the market and may require government intervention to control the surplus.

A Price Floor That Is Set Above the Equilibrium Price