A price floor is usually fixed
- at the equilibrium and causes shortage
- above the equilibrium and causes shortage
- below the equilibrium and causes shortage
-
above the equilibrium and causes surplus
The correct answer is: D
Explanation
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service.
A price floor is the lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. The most common price floor is the minimum wage--the minimum price that can be payed for labor.
For a price floor to be effective, it must be set above the equilibrium price.