If a Good Is Subject to a Binding Price Floor

question 103

Multiple Choice

If a good is subject to a binding price floor and someone purchases it on the black market,what would he or she expect to happen to the availability of the good over time?

• A) The availability of the good will fall over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The surplus of the good will fall. )
• B) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The surplus of the good will fall. )
• C) The availability of the good will rise over time as both the supply and demand curves become more elastic.(The surplus of the good will rise. )
• D) The availability of the good will fall over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The surplus of the good will fall. )
• E) The availability of the good will not change over time.

---

Definitions:

General Costs

General costs are indirect expenses related to the overall operations of a company that cannot be directly tied to a specific product or service, such as rent, utilities, and administrative salaries.

Indirect Materials

Materials used in the production process that do not directly become part of the finished product.

Manufacturing

The procedure of changing basic materials, components, or elements into end products that align with a customer’s needs or criteria.

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are a significant part of its cost.