Asked by Keshawn Johnson on May 18, 2024
Verified
Refer to Figure 4.3. An example of an effective price floor would be the government setting the price of pencils at
A) $0.00.
B) $0.40.
C) $0.45.
D) $0.50.
Price Floor
A government or regulatory-imposed price control that sets the minimum allowable price to be charged for a particular good or service. It is aimed at protecting producers by ensuring prices do not fall below a certain level.
Government
The governing body of a nation, state, or community, responsible for making and enforcing laws and policies.
Pencils
Writing instruments with a thin form factor, containing a core of graphite or a color pigment, used for writing or drawing.
- Familiarize oneself with the mechanisms of price ceilings and price floors as regulatory tools in markets.
Verified Answer
BG
brenda gamezMay 22, 2024
Final Answer :
D
Explanation :
A price floor is effective when it is set above the equilibrium price. Since the equilibrium price is not provided, we can infer from the options that setting the price at the highest value ($0.50) would most likely create a situation where the price floor is above the equilibrium price, making it effective.
Learning Objectives
- Familiarize oneself with the mechanisms of price ceilings and price floors as regulatory tools in markets.