Question:
Which of the following is true in the market for a certain product, if producers consistently are willing to sell more at the going price than consumers are willing to buy?
(1) Demand is highly inelastic
(2) Supply is highly elastic
(3) The product is inferior
(4) There is a price ceiling on the product
(5) There is a price floor on the product
Correct Answer:
(5)
Answer Explanation:
When producers want to sell more than consumers want to buy, the market is experiencing an excess supply (surplus). This consistently happens when the government imposes an effective Price Floor (minimum price) above the natural market equilibrium.
Topic: Market Equilibrium Year: 2017
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