Suppose Lewis Lives in a Community with No Price Controls

question 152

Multiple Choice

Suppose Lewis lives in a community with no price controls.What would he expect will happen if his town borders a community where there is a binding price floor on most products?

• A) Prices in the legal market in the community with a binding price floor will rise.
• B) Prices in the legal market in the community with a binding price floor will fall.
• C) There will be surpluses in the community with a binding price floor.
• D) More consumers will purchase the product in the community with the price floor.
• E) The black market in his community will be larger than the black market in the community with the binding price floor.

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Definitions:

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