-Refer to the above figure. A price support set at P3 will
A) lead to a surplus of Q3 minus Q1.
B) lead to a shortage of Q3 minus Q1.
C) lead to an equilibrium quantity of Q2.
D) be ineffective.

Question

-Refer to the above figure. A price support set at P3 will
A) lead to a surplus of Q3 minus Q1. 
B) lead to a shortage of Q3 minus Q1. 
C) lead to an equilibrium quantity of Q2. 
D) be ineffective.

Quizplus · Accepted Answer

Setting a price support above the equilibrium price (P3 in this case) results in a surplus because the quantity supplied (Q3) exceeds the quantity demanded (Q1).

-Refer to the Above Figure