Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

A) rations the excess demand for milk among consumers.
B) buys the excess supply of milk and removes it from the market.
C) Both A and B are plausible actions.
D) The government cannot maintain the price above the equilibrium level.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded in a market, resulting in no surplus or shortage.

Market Mechanism

Tendency in a free market for price to change until the market clears.

Federal Government

The national government of a federal state, which shares sovereignty with the constituent states or provinces and is typically responsible for national defense, foreign policy, and regulating inter-state commerce.