Final answer:
A government-set price floor is a minimum legal price to protect producers, like minimum wage for workers. It's ineffective below the market equilibrium price. It's used to ensure fairness and maintain production of essential goods.
Step-by-step explanation:
A government-set price floor on a product is a minimum legal price set by the government that must be paid for a good or service. Price floors are designed to protect producers by ensuring they can cover their costs and make enough profit to continue production. An example is the minimum wage, which assures workers a basic standard of living. However, it is important to note that a price floor will have no effect if it is set below the market's equilibrium price, as the market price would not be restricted by the price floor.
The use of price floors is part of the government's role in attempting to create fairness in the market when market forces alone do not achieve desired social outcomes, such as adequate income for labor or ensuring the continued production of essential goods like milk.