When a Price Floor Is Above the Equilibrium Price

question 196

Multiple Choice

When a price floor is above the equilibrium price,

• A) quantity demanded will exceed quantity supplied, so there will be a shortage.
• B) quantity supplied will exceed quantity demanded, so there will be a surplus.
• C) the market will be in equilibrium.
• D) This is a trick question because price floors are generally set below the equilibrium price.

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Definitions:

Standard Cost Models

Accounting models that use predetermined costs for calculating inventory valuations, cost of goods sold, and assessing operational efficiency.

Pretransaction Costs

Expenses incurred before the actual purchase or transaction takes place, such as research, supplier evaluation, and negotiation costs.

Value Engineering

A systematic process aimed at increasing the value of a product, project, or service by examining its functions, improving performance, and ensuring cost efficiency.

Value Analysis

A systematic approach to assess the functionality of goods and services with the goal of reducing cost without compromising on quality.