When the government sets a price floor which is above the equilibrium price
A) a surplus will develop.
B) a shortage will develop.
C) the equilibrium price will be maintained.
D) a price ceiling will follow.

Question

Quizplus · Accepted Answer

When the government sets a price floor which is above the equilibrium price, the new price will be higher than what the market would naturally support. This will discourage some buyers, leading to a surplus of the good or service, as suppliers will be producing more than there is demand for.

When the Government Sets a Price Floor Which Is Above