Figure 6-5
-Refer to Figure 6-5.Suppose the market is initially in equilibrium.Then the government imposes a price control,as represented by the solid horizontal line on the graph.If the price control is a price floor,then the price control

Question

Figure 6-5 
-Refer to Figure 6-5.Suppose the market is initially in equilibrium.Then the government imposes a price control,as represented by the solid horizontal line on the graph.If the price control is a price floor,then the price control

Quizplus · Accepted Answer

A price floor sets a legal minimum price above the equilibrium price. This will cause the quantity demanded to decrease and the quantity supplied to increase, resulting in a surplus. Some firms may not be able to sell all that they want because there will be excess supply in the market. Option A is incorrect as the quantity demanded and supplied are not explicitly given in the graph. Option B is incorrect as the graph does not indicate any change in quantity supplied. Option D is incorrect as options A and B are incorrect.

Figure 6-5 -Refer to Figure 6-5.Suppose the Market Is Initially in Equilibrium.Then