Question

if a government - imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
a. the quantity of milk demanded will increase.
b. there will be a surplus of milk.
c. there will be a shortage of milk.
d. the quantity of milk supplied will decrease.

Explanation:

A price floor above market equilibrium means the legal price is higher than the price where quantity supplied equals quantity demanded. At this higher price, producers will supply more milk (as higher prices incentivize increased production), while consumers will demand less milk (as higher prices reduce willingness to buy). When quantity supplied exceeds quantity demanded, a surplus occurs.

Answer:

b. There will be a surplus of milk.