-Refer to the above figure. A price control has been set which has led to a surplus. This means that a
A) price ceiling has been set at P1.
B) price floor has been set at P1.
C) price ceiling has been set at P2.
D) price floor has been set at P2.

Question

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a
A) price ceiling has been set at P1. 
B) price floor has been set at P1. 
C) price ceiling has been set at P2. 
D) price floor has been set at P2.

Quizplus · Accepted Answer

A price floor set above the equilibrium price (P2 in this case) leads to a surplus because it sets the minimum price at which goods can be sold higher than what the market is willing to pay, resulting in excess supply.

-Refer to the Above Figure