The Surplus Created by a Price Floor Will Likely Be

question 104

Multiple Choice

The surplus created by a price floor will likely be

• A) smaller if the good is a necessity.
• B) larger if the good is addictive.
• C) smaller if the good is a luxury.
• D) unaffected by the time that has elapsed since the price ceiling is implemented.
• E) None of the above answers is correct.

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Definitions:

Required Return

The minimum rate of return an investor expects to achieve by investing in a particular asset.

Initial Investment

The upfront sum of money required to start a project, purchase an asset, or invest in a business venture.

Cash Break-even Point

The cash break-even point is the level of output or sales at which a business generates enough revenue to cover its operating cash expenses, without necessarily making a profit.

Variable Cost

Outlays that rise and fall with the quantity of production or sales activities, encompassing costs such as materials and labor.