A price floor is usually fixed?

A. at the equilibrium and causes shortage
B. above the equilibrium and causes shortage
C. below the equilibrium and causes shortage
D. above the equilibrium and causes surplus

Correct Answer: Option B

B. above the equilibrium and causes shortage

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 paid for labor. For a price floor to be effective, it must be set above the equilibrium price.