Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The quantity of milk supplied will increase, leading to a surplus.
B
The price of milk will fall below the price floor, benefiting consumers.
C
The market will reach equilibrium at the price floor, balancing supply and demand.
D
The quantity of milk demanded will increase, leading to a shortage.
Understanding the Answer
Let's break down why this is correct
Answer
When a government sets a price floor on milk, it means that milk cannot be sold for less than a certain price. This is done to help farmers earn a better income by ensuring they receive enough money for their product. However, if the price is set too high, it can lead to a surplus of milk because consumers may buy less when the price increases. For example, if milk is usually sold for $3 a gallon but the price floor raises it to $4, some people might decide to buy less milk, causing farmers to have extra milk that they cannot sell. This situation can lead to wasted milk and economic challenges for both farmers and consumers.
Detailed Explanation
When a price floor is set, it means milk must be sold at a higher price. Other options are incorrect because Some might think that prices can drop below the floor; People may believe that the market will balance itself at the price floor.
Key Concepts
Price Floors
Market Equilibrium
Surplus
Topic
Price Floors and Market Impact
Difficulty
easy level question
Cognitive Level
understand
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