To Say That a Price Floor Is Binding Is to Say

question 20

Multiple Choice

To say that a price floor is binding is to say that the price floor

• A)results in a shortage.
• B)is set below the equilibrium price.
• C)causes quantity supplied to exceed quantity demanded.
• D)All of the above are correct.

---

Definitions:

Product Cost

The total expense incurred in the creation of a product, including direct materials, direct labor, and overhead costs.

Period Cost

Expenses that are not directly tied to the production process and are instead expensed in the period they are incurred.

Variable Cost

Costs that change in proportion to the level of output or activity, such as materials and labor involved directly in production.

Fixed Cost

Expenses that do not change in proportion to the volume of goods or services a company produces, such as rent, salaries, and insurance premiums.