A price floor (support price) set above equilibrium:
A) is a minimum legal price set by government above equilibrium.
B) causes the quantity supplied to exceed the quantity demanded.
C) creates a surplus.
D) can represent the effect of a minimum wage.
E) all of the above.

Question

Quizplus · Accepted Answer

A price floor is a minimum legal price set by the government above the equilibrium price. This causes the quantity supplied to exceed the quantity demanded, creating a surplus in the market. This surplus can lead to inefficiencies such as wasted resources and deadweight loss. Additionally, a price floor can also represent the effect of a minimum wage, as it establishes a floor below which wages cannot fall. Therefore, all of the options listed are correct.

A Price Floor (Support Price) Set Above Equilibrium