Which of the Following Is NOT True About Price Floors

question 150

Multiple Choice

Which of the following is NOT true about price floors?

• A) Consumer surplus is always lower than it would be in the competitive equilibrium.
• B) Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.
• C) Producer surplus could be negative as the result of a price floor.
• D) Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.
• E) The total producer surplus depends on how producers respond to the price floor in determining their output level.

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Definitions:

Past Actions

Refers to actions or decisions taken in the past that have potential implications or effects in the present or future.

Valid Consideration

A necessary element in the formation of a contract, referring to something of value that is exchanged between the parties.

Sham

A pretense or fake transaction intended to deceive others or for a purpose contrary to law or public policy.

Lack of Consideration

A situation in contract law where an agreement lacks the exchange of something of value, rendering the contract potentially unenforceable.