Suppose the government decides to create a price support (floor)on the price of corn. 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.

Question

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If the government sets a price floor for corn and does not buy any wheat, the price of wheat will be above the equilibrium price. This will lead to an excess supply of wheat in the marketplace, as farmers will produce more wheat than consumers are willing to buy at the higher price.

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