If the support price for wheat, that is a price floor for wheat, is set at $4.00

Question

If the support price for wheat, that is a price floor for wheat, is set at $4.00 per bushel when the equilibrium market price is $2.50 per bushel, there will be

A. an increase in supply as the supply curve for wheat shifts to the right

B. a decrease in the demand for wheat, and the demand curve for wheat will shift to the left

C. no change in the market for wheat as the price floor is ineffective as it is above the equilibrium price

D. a new equilibrium price at $4.00 as the demand and supply adjusts to the price floor

Explanation / Answer

If the support price for wheat, that is a price floor for wheat, is set at $4.00 per bushel when the equilibrium market price is $2.50 per bushel, there will be:

D. a new equilibrium price at $4.00 as the demand and supply adjusts to the price floor.

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