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Figure: The Market for Butter
-(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.20 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.
A) surplus; 4.5
B) shortage; 4.5
C) surplus; 1.5
D) shortage; 1.5

Question

Use the following to answer questions:
Figure: The Market for Butter 
-(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.20 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.
A) surplus; 4.5 
B) shortage; 4.5 
C) surplus; 1.5 
D) shortage; 1.5

Quizplus · Accepted Answer

A price floor set above the equilibrium price creates a surplus because the quantity supplied exceeds the quantity demanded. At $1.20, there is a surplus of 4.5 million pounds of butter.

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