Why Does a Surplus Exist Under a Binding Price Floor

question 88

Multiple Choice

Why does a surplus exist under a binding price floor?

• A) It encourages sellers to produce less of the product.
• B) It encourages buyers to purchase more of the product.
• C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
• D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
• E) It discourages sellers from increasing the quality of the products they sell,which in turn increases the quantity demanded.

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Definitions:

Shadow Negotiations

The often unseen or unofficial discussions and maneuvers that occur parallel to formal negotiations, shaping perceptions and agreements.

Peril

The exposure to serious and immediate danger or risk.

Pervasive Unhappiness

Widespread or all-encompassing feelings of sadness or dissatisfaction.

Ultimatums

Ultimatums, which are definitive conditions or propositions whose refusal will lead to countermeasures or the collapse of relationships.