Price Floors Would Create All of the Following Effects EXCEPT

question 163

Multiple Choice

Price floors would create all of the following effects EXCEPT:

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

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Definitions:

Downward-Sloping Demand

A market condition reflected in a demand curve where the quantity demanded of a good decreases as the price of that good increases, and vice versa.

Total Surplus

The sum of consumer and producer surplus; a measure of the overall benefit to society from a market transaction.

Perfectly Price-Discriminated

A pricing strategy situation where a seller charges the maximum possible price for each unit consumed that consumers are willing to pay, thereby capturing all potential consumer surplus.

Perfect Price Discrimination

The act of charging each consumer the maximum price that they are willing to pay for a product, thereby capturing the entire consumer surplus.