The correct answer is Option 2: Higher than
- A price floor is a minimum price set by the government, above the market equilibrium price, to prevent prices from falling too low.
- It is used to protect producers, ensuring they receive a fair price for their goods (e.g., Minimum Support Price (MSP) for farmers or minimum wage laws).
- If the price floor were set below or equal to the market price, it would have no effect, as the market would naturally maintain the higher price.
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