Question

The table below shows the market for bottled water  

Price per Bottle	Quantity Demanded	Quantity Supplied
$0.50	10	7
0.75	8	8
1.00	6	9
1.25	4	10
1.50	2	11

Suppose the government imposes a price floor of $1.00 per bottle of water. The price floor will result in

Group of answer choices

A.A surplus of two bottles

B.A shortage of three bottles

C.A shortage of two bottles

D.A surplus of three bottles

Answer 1

According to the data provided the equilibrium quantity in the market is 8 units. The market price at this rate is $0.75 per bottle. Price floor is set at $1 per bottle. price floor is a minimum limit imposed on the market price below which it cannot be sold and in this case it is binding because it is greater than the equilibrium price. at this price the quantity supplied is 9 units and quantity demanded is 6 units which means there is a surplus of 3 units which remain unsold

Option D is correct.