If a price floor is set below the current market clearing price, then
A) a surplus must immediately occur.
B) a shortage must immediately occur.
C) there will be incentives for black markets to develop.
D) quantity demanded will remain equal to quantity supplied at the current market clearing price.

Question

Quizplus · Accepted Answer

A price floor set below the current market clearing price does not affect the market because it is not binding. The market continues to operate at the equilibrium price where quantity demanded equals quantity supplied.

If a Price Floor Is Set Below the Current Market