Which of the following statements is false?
A)With a price floor, the market will not clear.
B)With a price floor, consumers will buy less of the good than they would in a free market.
C)With a price floor, producer surplus will always increase.
D)With a price floor there will be excess supply.

Question

Quizplus · Accepted Answer

This statement is false because while a price floor may benefit certain producers by ensuring a higher price for their goods, it can also lead to a decrease in overall consumer demand, which can ultimately decrease producer surplus if fewer consumers are buying the product. Therefore, it is not always the case that a price floor will lead to an increase in producer surplus. A price floor can lead to excess supply (D) and a market that does not clear (A), while also reducing consumer demand (B). The statement "With a price floor, producer surplus will always increase" is false. While it is true that some producers may experience an increase in surplus, others may not be able to sell all of their goods and experience a decrease in surplus. Additionally, the overall societal welfare may decrease due to deadweight loss caused by the price floor.

Which of the Following Statements Is False