Suppose the government wants to help low income producers in the clothing market. The government decides that the best course of action is to establish a price floor that is below the free market price. What is the likely effect of this price control?
A. A surplus of clothes.
B. A shortage of clothes.
C. Quantity supplied will increase.
D. Nothing. Market will remain in equilibrium.
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Correct Answer: D, Nothing. Market will remain in equilibrium. An effective price floor must be placed above equilibrium price, which then it would lead to a surplus.