g A government will create a surplus in a market when it Multiple Choice sets a price floor above the equilibrium price. sets a price floor below the equilibrium price. sets a price ceiling above the equilibrium price. sets a price ceiling below the equilibrium price.

sets a price floor above the equilibrium price.

Explanation:

Price floor is defined as a government imposed price regime that sets the minimum amount that suppliers can charge buyers for a particular good.

Suppliers are not allowed to charge below this price. For this strategy to be effective it needs to be a price that is above equillibrum price.

When price floor is above equillibrum price quantity supplied exceeds quantity demanded. This results in a surplus of goods and services.

The surplus effect is illustrated in the attached diagram.

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