A price floor in a perfectly competitive market
A)creates more harm for sellers than gain for buyers
B)is effective only it is set at the equilibrium price
C)is a Pareto improvement
D)can turn an inefficient outcome into an efficient outcome
E)creates more harm for buyers than gain for sellers

Question

Quizplus · Accepted Answer

A price floor set above the equilibrium price leads to excess supply, causing a surplus. This harms buyers as they face higher prices and reduced quantity, while sellers may not sell all their goods, but those who do benefit from higher prices.

A Price Floor in a Perfectly Competitive Market