If a Price Floor Is Not Binding, Then

question 308

Multiple Choice

If a price floor is not binding, then

• A)the equilibrium price is above the price floor.
• B)the equilibrium price is below the price floor.
• C)there will be a surplus in the market.
• D)there will be a shortage in the market.

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Definitions:

Original Issue Discount

The difference between the par (face) value of a bond and the lower price at which it was originally sold, which must be reported as interest income over the life of the bond.

Tax-exempt Debt

Debt securities issued by state or municipal governments whose interest payments are exempt from federal income tax, and sometimes state and local taxes.

Compensation for Injuries

Payments received as a result of injury or sickness, which can include damages for physical discomfort or emotional distress.

Employer-provided Adoption Assistance

Benefits provided by an employer to an employee to help cover some of the costs associated with adopting a child.