When a Price Floor Is in Effect

question 273

Multiple Choice

When a price floor is in effect:

• A) demanders get too strong of a signal from suppliers about product availability.
• B) suppliers have no incentive to signal product availability to demanders.
• C) all of the suppliers' product is purchased at the lower price, so there is no need to signal anything to demanders.
• D) suppliers cannot signal their product availability to demanders.

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Definitions:

Pre-emptive Rights

Legal rights granted to existing shareholders to purchase additional shares in a corporation before new shares are offered to the public, to maintain their proportional ownership.

Shareholder's Agreement

A contract between the shareholders of a company that specifies their rights, privileges, protections and obligations.

Minority Shareholder

An owner of a minority interest in a corporation, typically holding less than 50% of the company's shares.

Unanimous Shareholders' Agreement

A contract among all shareholders of a company that may alter or remove the powers of the directors.