Price floor creates excess supply at $5

Steps:

• Set demand equal to supply: 500 - P = 300P → P = 500/301 ≈ $1.66 (equilibrium price).
• At P = $5 (> equilibrium), calculate quantity demanded: 500 - 5 = 495 units.
• Calculate quantity supplied: 300 × 5 = 1,500 units.
• Compare: supplied (1,500) > demanded (495), so excess supply; regulation is a binding minimum price.

Why D is correct:

• A price floor above equilibrium restricts quantity sold to demand (495) but incentivizes excess production (1,500), creating surplus per supply-demand law.

Why the others are wrong:

• A: Maximum price (ceiling) below equilibrium causes excess demand, not supply.
• B: Minimum price causes excess supply, but B says excess demand (incorrect mismatch).
• C: Minimum price causes excess supply, not demand.

Final answer: D