The government sets a price floor for corn,which is above the equilibrium price of corn.As a result
A)the market for corn is efficient.
B)a shortage of corn occurs.
C)consumer surplus is maximized.
D)a deadweight loss is created.
E)the sum of consumer surplus and producer surplus is maximized.

Question

Quizplus · Accepted Answer

When the government sets a price floor above the equilibrium price, it creates a deadweight loss. This is because the quantity supplied of corn will exceed the quantity demanded, leading to excess supply and inefficient allocation of resources. Some producers may benefit from the higher price, but overall there will be a loss of welfare in the market. Therefore, the best choice is D, as it correctly identifies the negative impact of a price floor on the corn market.

The Government Sets a Price Floor for Corn,which Is Above