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Agriculture Economics QUESTION #11897
Question 1
A price support (price floor) set above equilibrium in an agricultural market typically results in:
  • A shortage of the commodity
  • A surplus, since $Q_s > Q_d$, that the government or market must absorb✔️
  • No effect on quantity supplied
  • A decrease in the equilibrium price automatically
Correct Answer Explanation
A price floor above equilibrium causes quantity supplied to exceed quantity demanded ($Q_s > Q_d$), generating a surplus.