-Refer to the Above Figure

question 185

Multiple Choice

-Refer to the above figure. If a price floor of $5 was set

• A) the quantity sold would be 80 units.
• B) there would be a surplus of 40 units.
• C) there would be a shortage of 40 units.
• D) there would be a shortage of 20 units.

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Definitions:

Average Fixed Costs

Fixed costs divided by the quantity of output produced, indicating the fixed cost per unit of output.

Constant Returns to Scale

The situation in which a proportional increase in all inputs leads to an equal proportional increase in output.

Wage Rate

The standard amount of compensation paid to an employee per unit of time worked, typically expressed on an hourly or monthly basis.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product that is similar across suppliers, leading to price determination by supply and demand.