If a Price Floor Is Set Below the Equilibrium Price

question 237

Multiple Choice

If a price floor is set below the equilibrium price in the market, consumer surplus will be

• A) higher than it would be without the price floor.
• B) lower than it would be without the price floor.
• C) the same as it would be without the price floor.
• D) impossible to calculate.

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Definitions:

Industry Supply Curve

A graphical representation that shows the relationship between the price of a good and the total output of that good by all firms in the industry.

Diminishing Returns

A principle stating that as one factor of production increases while others remain fixed, there will eventually be a decrease in the incremental output gained.

Normal Rate

A standard or usual level of financial return on investment or interest on loans.

Supply

The total amount of a product or service that is available to consumers at a given price over a specific period.