A market consequence of the establishment of a price floor program is that the price will be:
A) too low and an excess supply will result.
B) too low and a shortage will result.
C) below the market equilibrium price.
D) too high and an excess supply will result.

Question

Quizplus · Accepted Answer

A price floor set above the market equilibrium price leads to a higher price than what the market would naturally set, resulting in excess supply because the quantity supplied at this higher price exceeds the quantity demanded.

A Market Consequence of the Establishment of a Price Floor