A price floor is a government-imposed minimum price above the equilibrium price. When a price floor is set, it creates a market surplus because the quantity supplied exceeds the quantity demanded at the higher price. This means that producers are willing and able to supply more goods than consumers are willing and able to buy. Therefore, choice D is the correct answer.

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A Price Floor

Question 95

Multiple Choice

A price floor:

A) Decreases the quantity producers are willing and able to supply relative to the equilibrium level.
B) Increases the quantity demanded relative to the equilibrium level.
C) Causes excess demand.
D) Creates a market surplus.

Correct Answer: