Suppose the price of wheat is set at $5 a bushel and not allowed to decrease. This price is above the equilibrium price, which causes a surplus of wheat in the marketplace. This situation describes a _____.
Answer: Suppose the price of wheat is set at $5 a bushel and not allowed to decrease. This price is above the equilibrium price, which causes a surplus of wheat in the marketplace. This situation describes a PRICE FLOOR.
Explanation: Price floor: Government practice consisting in setting a price above the market price; It tends to benefit producers. For this measure to be effective, means must be administered to absorb surplus production.
