PRC-3 · Chapter 10 · Question 13 of 70
To protect poor farmers, the government sets a legal 'price floor' (minimum price) for wheat that is substantially above the natural market equilibrium. What is a direct consequence of this policy?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A massive surplus of unsold wheat
Explanation
A price floor set above the equilibrium price means suppliers produce more than consumers are willing to buy at that high price, creating a surplus.
More Demand, Supply and Market Equilibrium MCQs
- Q15Two goods, Alpha and Beta, are substitutes. If the government places a heavy tax on the production of Alpha, causing its price to rise…
- Q16A massive improvement in robotic automation significantly lowers the cost of manufacturing laptops. Simultaneously, laptops become a…
- Q17Which of the following events would NOT cause a shift in the demand curve for beef?
- Q18A cartel of oil-producing nations decides to artificially restrict the pumping of oil to half of the normal capacity. What is the…
- Q19If the government maintains a 'Buffer Stock' system for agricultural crops, what action does it take during a year of exceptional…