A minimum price set below the market equilibrium will lead to excess supply and to a drop in the total surplus of the market.

Question

Quizplus · Accepted Answer

A minimum price set below the market equilibrium will lead to excess supply and a shortage, not a drop in the total surplus of the market. The total surplus is comprised of consumer surplus and producer surplus, and a price floor (minimum price) may reduce consumer surplus but increase producer surplus, resulting in a potential net gain for the market, depending on the specific circumstances.

A Minimum Price Set Below the Market Equilibrium Will Lead