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.

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Definitions:

Annual Cash Inflows

The total amount of money received by a company or individual within a year from various sources.

Economic Life

Economic life is the estimated period over which an asset is expected to be useful to the owner for the purpose of generating income or other economic benefits.

Internal Reports

Reports generated within an organization for the purpose of decision making by management, not for public dissemination.

Actual Impact

The real effect or consequence that an event, decision, or action has had.