FIGURE 5-3 -Refer to Figure 5-3.If the government imposes a price floor at P₃,the result would be a price and quantity combination of A)P₃and Q₃. B)P₃and Q₄. C)P₂and Q₁. D)P₁and Q₀. E)P₃and Q₀.

Question

Quizplus · Accepted Answer

When a price floor is imposed at P₃, it creates a situation where the price is artificially raised above the equilibrium level. This means that there will be excess supply, as the quantity supplied by producers (Q₂) will exceed the quantity demanded by consumers (Q₁). The correct answer is therefore the price and quantity combination at the intersection of the excess supply curve (Q₂) and the demand curve, which is P₁ and Q₀.

FIGURE 5-3 -Refer to Figure 5-3.If the Government Imposes a Price Floor