If the government imposes a minimum price on a commodity?

A. market surplus occurs
B. the market will be cleared in the short-run
C. excess demand occurs
D. government regulation is no longer needed

Correct Answer:

Option A – market surplus occurs

Explanation

Minimum price is often called price floor and it is fixed by the government to protect the producer or seller. Minimum price is set above the equilibrium price and when this occur, there will be excess supply over demand i.e surplus.