Question

one of the problems created by price floors set above the equilibrium is:
a. firms dont have incentives to reduce costs.
b. the effect on firm profitability.
c. the creation of surplus.
d. how to cope with the shortages.

Explanation:

A price floor set above equilibrium forces the market price higher than the point where supply and demand meet. At this higher price, suppliers are willing to produce more, while consumers demand less, resulting in an excess of the good (a surplus). Option a is not a direct inherent problem of the price floor itself; option b is vague and not a specific core issue; option d is incorrect because price floors above equilibrium cause surpluses, not shortages.

Answer:

c. the creation of surplus.