Suppose the government sets a price floor that is below the equilibrium price of a good. The price floor will:
A)result in a surplus of the good.
B)result in a shortage of the good.
C)have no immediate effect on the price of the good.
D)increase the quantity supplied of the good.

Question

Quizplus · Accepted Answer

Since the price floor is below the equilibrium price, it will have no immediate effect on the price of the good. The market will continue to operate at the equilibrium price and quantity. However, if the price floor is enforced, it will create a situation where producers may want to supply more of the good than consumers are willing to buy, leading to a surplus.

Suppose the Government Sets a Price Floor That Is Below