Suppose the state of Mississippi sets a price floor in the market for cotton.If the floor is set below the market-clearing price of cotton,the floor will cause a surplus of cotton.

Question

Quizplus · Accepted Answer

A price floor is a minimum price imposed by the government on a product or service. If the price floor is set below the market-clearing price, it will not have any effect on the market. However, if the price floor is set above the market-clearing price, it will lead to a surplus of the product. Therefore, if the state of Mississippi sets a price floor for cotton below the market-clearing price, it will not cause a surplus of cotton.

Suppose the State of Mississippi Sets a Price Floor in the Market