If a Price Floor Imposes a Binding Constraint on a Market

question 52

Multiple Choice

If a price floor imposes a binding constraint on a market, then _____.

• A)the equilibrium price should be above the price floor
• B)the quantity demanded should exceed the quantity supplied
• C)sellers cannot sell all they want to sell at the price floor
• D)buyers cannot buy all they want to buy at the price floor
• E)the equilibrium price should be equal to the price floor

---

Definitions:

Profit-Maximizing Level

The point at which a firm achieves its highest profit, determined by the level of output where marginal cost equals marginal revenue.

Market Price

The actual selling price of a good or service in the marketplace at which buyers and sellers conduct transactions.

Total Revenue

The total income a firm receives from the sales of its products or services before any expenses are subtracted.

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.