Price Floors Would Create All of the Following Effects EXCEPT

question 27

Multiple Choice

Price floors would create all of the following effects EXCEPT:

• A) surpluses.
• B) deadweight loss.
• C) wasteful decreases in product quality.
• D) misallocation of resources.

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Definitions:

Market Demand Curve

A graphical representation showing the relationship between the price of a good and the total quantity demanded by all consumers in the market.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, often associated with public goods and services.

Free-Market Economy

An economic system where prices are determined by unrestricted competition between privately owned businesses without government intervention.

Negative Externality

A situation where a third party suffers costs or harm as a result of an economic transaction between other parties, without compensation, such as pollution from a factory affecting nearby residents.