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:

Market Entry

The process by which a new competitor enters an existing market, often involving overcoming barriers to entry.

AVC

Average Variable Cost, which is the total variable costs of production divided by the quantity of output produced.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from revenue; also known as supernormal profits.