What happens when a minimum price is imposed in a market?...
What happens when a minimum price is imposed in a market?
Shortage occurs
Surplus occurs
Market maintains its equilibrium
Many firms will close down
Correct answer is B
A minimum price is when the government doesn't allow prices to go below a certain level. At this point, suppliers will be willing to supply more in the market because they are certain to sell above a particular price. This will lead to a surplus in the market.
The minimum price policy has been used in agriculture to increase farmer's income.
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