Asked by ashish adhikari on Jun 27, 2024
Verified
The market for apples is in equilibrium at a price of $0.50 per pound.If the government imposes a price floor in the market at a price of $0.40 per pound:
A) quantity demanded will decrease.
B) quantity supplied will increase.
C) there will be a shortage of apples.
D) the price floor will not affect the market price or output.
Price Floor
A government- or authority-imposed minimum price that can be charged for a good or service, intended to prevent prices from falling too low.
Market Price
The actual selling price of a good or service in the marketplace, determined by supply and demand dynamics at any given time.
- Understand the circumstances where price controls have a binding effect or lack thereof.
Verified Answer
SZ
Stephanie ZapataJun 27, 2024
Final Answer :
D
Explanation :
Since the price floor is set below the equilibrium price of $0.50 per pound, it will not be binding and will have no effect on the market price or quantity. The market will continue to operate at the equilibrium price.
Learning Objectives
- Understand the circumstances where price controls have a binding effect or lack thereof.