If the government sets a minimum price above the equilibrium price for soybeans, which of the following statements will be correct?
A. There will be an efficient level of output produced.
B. There will be excess supply.
C. There will be excess demand.
D. all of the above
An-B
i agree
To determine the correct statement, let's first understand the concept of minimum price and its effect on the market.
A minimum price, also known as a price floor, is the lowest price at which a good or service can legally be sold. In the context of soybeans, if the government sets a minimum price above the equilibrium price, it means that the government is mandating that the price of soybeans cannot go below a certain level.
Now, let's address each statement:
A. "There will be an efficient level of output produced." This statement is incorrect. When a minimum price is set above the equilibrium price, it typically leads to a decrease in output because producers may not be willing or able to sell their products at the higher price. This can result in a reduction in the quantity of soybeans produced, which is inefficient.
B. "There will be excess supply." This statement is correct. When the government sets a minimum price above the equilibrium, it creates a situation where the quantity supplied at that price exceeds the quantity demanded. Producers are willing to supply more soybeans at the higher price, but consumers may not be willing to buy as much at that price. This leads to excess supply or a surplus.
C. "There will be excess demand." This statement is incorrect. When a minimum price is set above the equilibrium price, it typically leads to a decrease in demand because consumers are less willing to buy the product at the higher price. This can result in a reduction in the quantity of soybeans demanded, which is inefficient.
D. "All of the above." This statement is incorrect because statement A is incorrect. Therefore, the correct statement would be: "B. There will be excess supply."
So, the correct answer is B. There will be excess supply.