Concept:A minimum price (price floor) is a government-set price fixed above the market equilibrium price.
Explanation:The government imposes a minimum price mainly to protect producers or sellers from very low prices.
For it to be effective, the minimum price must be set above the equilibrium price:
Pmin>Pe.
At this higher price, producers are willing to supply a larger quantity of the commodity.
Consumers, however, will demand a smaller quantity because the price is raised.
Consequently, the quantity supplied becomes greater than the quantity demanded.
This situation leads to excess supply, which is known as a market surplus.
It is not excess demand, which occurs when a maximum price is set below the equilibrium.
Therefore, a minimum price results in a market surplus rather than a cleared market.
Answer:A. market surplus occurs