Suppose the equilibrium price of a bunch of carrots is $1.The price floor instituted by the government is $1.50.

Question

Quizplus · Accepted Answer

The government has set a price floor higher than the equilibrium price, which means that the price that the farmers receive for their carrots is higher than the market price. This will incentivize farmers to produce more carrots in order to take advantage of the higher price. However, consumers will not be willing to buy as many carrots at the higher price, which will lead to a surplus of carrots in the market.

Suppose the Equilibrium Price of a Bunch of Carrots Is