Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Farmers produce more of the staple food, leading to a surplus, while consumers buy less due to higher prices.
B
Consumers continue buying the same amount of the staple food, resulting in no change in market dynamics.
C
The price floor leads to an increase in consumer surplus because producers have more incentive to supply the product.
D
The market equilibrates at a higher quantity supplied and demanded, benefiting both consumers and producers.
Understanding the Answer
Let's break down why this is correct
Answer
A price floor is a minimum price set by the government that must be paid for a good or service. When the government sets a price floor for a staple food item, like rice, it means that sellers cannot sell it for less than this price. This can help farmers earn more money, but it can also lead to some problems. For example, if the price floor is set too high, consumers may buy less rice because it becomes more expensive, leading to a surplus of rice that farmers cannot sell. In this way, while the price floor helps farmers, it can also create waste and make it harder for some people to afford the food they need.
Detailed Explanation
When a price floor is set, it means the price cannot go below a certain level. Other options are incorrect because This answer suggests nothing changes, which isn't true; This option wrongly claims that consumers benefit more.
Key Concepts
Price Floors
Market Surplus
Consumer Behavior
Topic
Price Floors and Market Impact
Difficulty
easy level question
Cognitive Level
understand
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