A. at the equilibrium and causes shortage B. above the equilibrium and causes shortage C. below the equilibrium and causes shortage D. above the equilibrium and causes surplus
Correct Answer: D
Explanation
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor is the lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. The most common price floor is the minimum wage--the minimum price that can be payed for labor. For a price floor to be effective, it must be set above the equilibrium price.
