If the government presets a price that turns out to be above the actual equilibrium price,a surplus will develop in the market.

Question

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When the government presets a price above the equilibrium price, it creates a situation where the quantity supplied exceeds the quantity demanded, which creates a surplus in the market. This surplus occurs because at the higher price, suppliers are willing to produce more than consumers are willing to buy, which results in excess supply.

If the Government Presets a Price That Turns Out to Be