Why Does a Surplus Exist Under a Binding Price Floor

question 88

Multiple Choice

Why does a surplus exist under a binding price floor?

• A) It encourages sellers to produce less of the product.
• B) It encourages buyers to purchase more of the product.
• C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
• D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
• E) It discourages sellers from increasing the quality of the products they sell,which in turn increases the quantity demanded.

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Definitions:

Operating Departments

Departments within an organization that are directly involved in carrying out its primary activities or business operations.

Allocating Costs

The process of distributing expenses among various departments, products, or services based on predetermined criteria.

Service Departments

Divisions within a company that provide support and services to other departments rather than directly generating revenue.

Indirect Expenses

Costs that are not directly associated with the production of goods or services but necessary for the business to operate, like rent and utilities.