A Price Floor That Is Set Above the Equilibrium Price

question 106

Multiple Choice

A price floor that is set above the equilibrium price

• A)causes suppliers to lose money.
• B)creates a shortage.
• C)is non-binding.
• D)creates a surplus.

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Definitions:

Fixed Corporate Costs

Expenses that do not vary with production volume or sales, such as salaries of managerial staff and rent for corporate headquarters.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume.

Avoidable Expenses

Costs that can be eliminated if a certain decision is made, such as discontinuing a product line.

Financial Advantage

A benefit enjoyed by an entity that puts it in a stronger financial position, such as lower costs, greater revenues, or superior investment returns.