If the Government Removes a Binding Price Floor from a Market,then

question 22

Multiple Choice

If the government removes a binding price floor from a market,then the price received by sellers will

• A)decrease,and the quantity sold in the market will decrease.
• B)decrease,and the quantity sold in the market will increase.
• C)increase,and the quantity sold in the market will decrease.
• D)increase,and the quantity sold in the market will increase.

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Definitions:

Consumer Surplus

The gap between the total sum consumers are ready and able to spend for a good or service and the actual amount they pay.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded, typically downward sloping to the right, reflecting the inverse relationship between price and quantity demanded.

Market Price

The current price at which an asset or service can be bought or sold in a competitive marketplace.

Firm's Willingness

The inclination or readiness of a business to take certain actions, such as producing a certain quantity of goods or setting a certain price, based on economic motivations.