A Price Floor Is

question 178

Multiple Choice

A price floor is

• A)a legal minimum on the price at which a good can be sold.
• B)often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor.
• C)a source of inefficiency in a market.
• D)All of the above are correct.

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Definitions:

CAPM

The Capital Asset Pricing Model, a formula used to determine the theoretical expected return of an investment given its risk relative to the market.

Risk-free Asset

An investment with zero risk of financial loss, typically considered to be government bonds.

Systematic Risk

Systematic risk refers to the risk inherent to the entire market or market segment, which cannot be mitigated through diversification.

CAPM

A financial theory that calculates the expected return on an investment based on its risk relative to the market as a whole.