Asked by Adrian Batista on May 10, 2024
Verified
Refer to Figure 6-16. A price floor set at $60 would create a surplus of 20 units.
Price Floor
A government or regulatory-imposed minimum price for a good or service, intended to ensure that the market price does not fall below a certain level.
Surplus
The amount of a product or resource that exceeds the amount actually utilized or demanded.
- Gain insight into how established minimum prices above equilibrium can result in market surpluses or shortages.
Verified Answer
HF
Hannan FarooqMay 12, 2024
Final Answer :
True
Explanation :
A price floor set above the equilibrium price (which appears to be below $60 based on the context) would result in a quantity supplied that exceeds the quantity demanded, thus creating a surplus. Assuming the figure shows a surplus of 20 units at a price floor of $60, this statement is true.
Learning Objectives
- Gain insight into how established minimum prices above equilibrium can result in market surpluses or shortages.