Asked by Aksarapak Bunchongpru on Jul 05, 2024
Verified
A binding price floor is a _____ price set _____ the equilibrium price.
A) minimum;at
B) maximum;below
C) minimum;above
D) maximum;above
Binding Price Floor
A minimum price set by the government that is above the equilibrium price, resulting in a surplus of the product.
Equilibrium Price
The price at which the quantity of a good or service supplied equals the quantity demanded, leading to market stability.
- Determine the circumstances in which price regulations (such as maximum and minimum limits) are deemed restrictive.
Verified Answer
SH
Sonia HanifaJul 05, 2024
Final Answer :
C
Explanation :
A price floor is set above the equilibrium price to ensure that suppliers receive a minimum price for their goods or services. If the floor is set below the equilibrium price, it becomes irrelevant and has no effect on the market. Therefore, the correct choice would be a minimum price set above the equilibrium price, which is represented by choice C.
Learning Objectives
- Determine the circumstances in which price regulations (such as maximum and minimum limits) are deemed restrictive.