Final answer:
A price floor on milk does not always lead to a surplus because the market price can rise above the price floor, making it ineffective. When above equilibrium, it can cause a surplus and potentially create market inefficiencies and a deadweight loss. Therefore, the correct option is C.
Step-by-step explanation:
If the U.S. government sets a price floor on milk, it will not always lead to a surplus because c) the market price of milk will sometimes rise above the price floor, rendering the price floor irrelevant. A price floor, which is a minimum price set by the government, is intended to protect producers, ensuring that they can cover their costs and continue producing the product. When the market price is higher than the price floor, the price floor has no effect since the market is dictating a price that is already above the minimum. During these times, the forces of supply and demand work without the constraints of the government's price control, which can result in the market reaching a natural equilibrium.
However, when the price floor is above the equilibrium price, it can lead to a surplus where quantity supplied exceeds quantity demanded because the higher price discourages consumers. This situation can result in unintended consequences, such as creating a deadweight loss by blocking transactions that buyers and sellers would otherwise be willing to make. In summary, a price floor can protect producers, but when above equilibrium, it can disrupt the market, causing inefficiencies.