-Refer to the above figure. Other things being equal, when the government imposes a price floor at P2, then we would expect
A) the quantity demanded is Q2.
B) a surplus will occur.
C) price to decline until an equilibrium is achieved at P0.
D) consumers to bid against each other for goods and force the price even higher.

Question

-Refer to the above figure. Other things being equal, when the government imposes a price floor at P2, then we would expect
A) the quantity demanded is Q2. 
B) a surplus will occur. 
C) price to decline until an equilibrium is achieved at P0. 
D) consumers to bid against each other for goods and force the price even higher.

Quizplus · Accepted Answer

A price floor set above the equilibrium price (P0) causes a surplus because the quantity supplied (Q3) exceeds the quantity demanded (Q2). This leads to excess supply in the market.

-Refer to the Above Figure