If the Government Removes a Binding Price Floor from a Market,then

question 22

Multiple Choice

If the government removes a binding price floor from a market,then the price received by sellers will

• A)decrease,and the quantity sold in the market will decrease.
• B)decrease,and the quantity sold in the market will increase.
• C)increase,and the quantity sold in the market will decrease.
• D)increase,and the quantity sold in the market will increase.

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Definitions:

Mixed Costs

Expenses comprising both fixed and variable components, changing in total with the level of activity but not proportionately.

Merchandising Firm

A business that purchases finished goods for resale in order to make a profit, differentiating itself from manufacturing firms and service firms.

Gross Margin

The difference between sales revenue and the cost of goods sold, expressed as a percentage of sales revenue.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted; a measure of profitability.