If a Price Floor Is Not Binding, Then

question 248

Multiple Choice

If a price floor is not binding, then

• A)there will be a surplus in the market.
• B)there will be a shortage in the market.
• C)there will be no effect on the market price or quantity sold.
• D)the market will be less efficient than it would be without the price floor.

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Definitions:

Market Price

The present rate at which a product or service can be purchased or sold on the market.

Downward-Sloping Demand

A market situation in which the quantity demanded of a good or service decreases as its price increases, depicting an inverse relationship between price and demand.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus what they actually pay.

Willingness to Pay

The maximum amount an individual or organization is willing to spend to acquire a good or service.