Which of the following best describes the impact of a price floor on a market?

A price floor is a minimum legal price set above the equilibrium price, which is the point where supply meets demand. When a price floor is established above this equilibrium level, it results in suppliers being willing to produce more of the good or service at that higher price, while consumers are less willing to purchase as much. This leads to an imbalance where the quantity supplied exceeds the quantity demanded, resulting in a surplus.

Surpluses occur because the higher price discourages consumer purchases, while at the same time, it encourages producers to supply more than what is needed in the market. Therefore, it is accurate to state that a price floor, when set above the equilibrium price, can indeed lead to a surplus of the product.

In contrast, other options suggest effects that are not aligned with the fundamental economic principles surrounding price floors. For example, eliminating a surplus is unlikely because the price floor leads to excess supply rather than mitigating it. Similarly, asserting that a price floor has no effect on supply and demand ignores the dynamic changes that occur in consumer behavior and production incentives due to the floor's implementation. Lastly, encouraging competition among producers is not typically a result of a price floor; rather, it can reduce competition since higher prices may shield some producers from market forces