Why Does a Surplus Exist Under a Binding Price Floor

question 113

Multiple Choice

Why does a surplus exist under a binding price floor?

• A) It encourages sellers to produce less of the product.
• B) It encourages buyers to purchase more of the product.
• C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
• D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
• E) It discourages sellers from increasing the quality of the product they sell, which, in turn, increases the quantity demanded.

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