What happens when a minimum price is imposed in a market?
A. Shortage occurs B. Surplus occurs C. market maintains its equilibrium D. Many firms will close down
Correct Answer: B
Explanation
A minimum price is when the government doesn't allow prices to go below a certain level. At this point, suppliers will be willing to supply more in the market because they are certain to sell above a particular price. This will lead to a surplus in the market. The minimum price policy has been used in agriculture to increase farmers' income.
