A Nonbinding Price Floor

question 214

Multiple Choice

A nonbinding price floor
i.causes a surplus.
ii.causes a shortage.
iii.is set at a price above the equilibrium price.
iv.is set at a price below the equilibrium price.

• A) (iii) only
• B) (iv) only
• C) (i) and (iii) only
• D) (ii) and (iv) only

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Definitions:

Preferred

Indicating a greater liking for one alternative over another or others.

Marginal Rate

The rate at which a change is made from one level to another, often used in the context of taxes or interest rates.

Indifference Curve

A graph representing combinations of goods or services among which a consumer is indifferent.

Substitution

The process of replacing one good or service with another, often due to changes in relative prices, quality, or availability.