PRC-3 · Chapter 10 · Question 37 of 70
If a government decides to impose a 'Price Floor' on wheat to guarantee farmers a high income, and sets this price significantly above the market equilibrium, what will be the result?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A surplus (excess supply) of wheat
Explanation
A price floor set above the natural equilibrium price causes quantity supplied to exceed quantity demanded, inevitably creating a surplus.
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