Suppose the government decides to create a price support (floor)on the price of corn, which of the following is a true statement?
A)A binding price support/floor will tend to lower the price of corn for poorer people.
B)If the government does not buy any wheat, there will tend to be an excess supply of wheat in the marketplace, if the price floor is binding.
C)A non-binding price support/floor below the equilibrium price in the market will also lead to a rise in the price of corn.
D)It is likely that the total surplus (consumer surplus plus producer surplus)will rise with a price support program.

Question

Quizplus · Accepted Answer

A binding price floor set above the equilibrium price will result in excess supply because the price is too high for the quantity demanded to absorb all the quantity supplied, assuming the government does not intervene to purchase the surplus.

Suppose the Government Decides to Create a Price Support (Floor)on