An Effective Price Floor on Wheat Will

question 274

Multiple Choice

An effective price floor on wheat will

• A) force otherwise profitable farmers out of business.
• B) result in a shortage of wheat.
• C) result in a surplus of wheat.
• D) clear the market for wheat.

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Definitions:

Marginal Revenue

The additional income from selling one more unit of a good or service.

Marginal Cost

The hike in overall costs when one extra unit of a product or service is produced.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing surplus remaining after all costs have been paid.

Entry Barriers

Obstacles that prevent or hinder new competitors from easily entering an industry or area of business.