Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price floor imposed at $7 per thousand cubic feet. That price floor is then lowered to $5 per thousand cubic feet. As a result,
A)the shortage of natural gas will get worse.
B)the shortage of natural gas will get less severe.
C)the surplus of natural gas will get worse.
D)the surplus of natural gas will be eliminated.

Question

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price floor imposed at $7 per thousand cubic feet. That price floor is then lowered to $5 per thousand cubic feet. As a result,
A)​the shortage of natural gas will get worse.
B)​the shortage of natural gas will get less severe.
C)​the surplus of natural gas will get worse.
D)​the surplus of natural gas will be eliminated.

Quizplus · Accepted Answer

When the price floor is lowered to the equilibrium price, there will no longer be any incentive for producers to hold on to their natural gas and the surplus will be eliminated. Therefore, the correct answer is D.

Say That the Equilibrium Price of Natural Gas Would Be