What will be the economic effects of the price floor if the government creates a price floor making it illegal to sell milk below a profitable price?

Answer 1

A price floor on milk set above the market equilibrium price would lead to a surplus, as producers would supply more milk than consumers are willing to purchase at that price. This could result in wasted resources, as unsold milk may need to be disposed of or stored. Additionally, consumers may seek alternatives or reduce their overall consumption, potentially harming lower-income households that rely on affordable milk. Overall, the intended support for producers could disrupt market dynamics and create inefficiencies in the dairy industry.