A price floor in a perfectly competitive market
A)is efficient
B)is a Pareto improvement
C)is effective only if it is set below the equilibrium price
D)transfers some surplus from consumers to producers
E)transfers some surplus from producers to consumers

Question

Quizplus · Accepted Answer

A price floor set above the equilibrium price results in a higher price than the market would naturally set, leading to a surplus of goods. This transfers some consumer surplus to producers, as consumers pay higher prices.

A Price Floor in a Perfectly Competitive Market