(Figure: The Market for Milk) Use Figure: The Market for Milk. If a government price floor of $1.30 is imposed on this market, inefficiency will result in the form of a _____ of _____ gallons of milk.
A)surplus; 4.5
B)surplus; 6.0
C)shortage; 6.0
D)shortage; 4.5

Question

(Figure: The Market for Milk) Use Figure: The Market for Milk. If a government price floor of $1.30 is imposed on this market, inefficiency will result in the form of a _____ of _____ gallons of milk. 
A)surplus; 4.5 
B)surplus; 6.0 
C)shortage; 6.0 
D)shortage; 4.5

Quizplus · Accepted Answer

When the price floor is set at $1.30, it is above the equilibrium price of $1.20. This will cause a surplus of milk as the quantity supplied (12 billion gallons) will exceed the quantity demanded (6 billion gallons) by 6 billion gallons. Therefore, the correct choice is B, surplus of 6.0 gallons of milk.

(Figure: the Market for Milk) Use Figure: the Market for Milk