Suppose the government sets a price floor that is above the equilibrium price of a good. The price floor will:
A)result in a surplus of the good.
B)result in a shortage for 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

When the government sets a price floor above the equilibrium price, it creates a situation where suppliers are willing to supply more of the good than consumers are willing to buy at the higher price, resulting in a surplus of the good. This is because the price floor creates a higher price, which decreases demand and increases supply. Therefore, choice A is correct.

Suppose the Government Sets a Price Floor That Is Above