Why Is It Often Difficult to Remove a Binding Price

question 171

Multiple Choice

Why is it often difficult to remove a binding price floor after it exists?

• A) in general,because consumers benefit from the lower prices and would lobby their elected officials to keep the price control
• B) in general,because consumers benefit from higher quality products and would lobby their elected officials to keep the price control
• C) in general,because consumers benefit from larger products and would lobby their elected officials to keep the price control
• D) in general,because sellers benefit from higher prices and would lobby their elected officials to keep the price control
• E) in general,because it has little effect on the market price and people forget about it

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Definitions:

Discounted Free Cash Flow

A valuation method estimating the attractiveness of an investment opportunity by discounting projected free cash flows.

Average Cost

A method to determine the cost basis of investments by averaging the purchase price of all the shares.

Capital

Funds or resources that individuals or businesses use to invest in assets or operations with the goal of generating income or profit.

Free Cash Flow Valuation Approach

A method of valuing a business by estimating the cash that can be generated after accounting for capital outlays necessary to maintain or expand the asset base.