If a Price Floor Is Set Below the Current Market

question 218

Multiple Choice

If a price floor is set below the current market clearing price, then

• A) a surplus must immediately occur.
• B) a shortage must immediately occur.
• C) there will be incentives for black markets to develop.
• D) quantity demanded will remain equal to quantity supplied at the current market clearing price.

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Definitions:

Stamped Imprint

A type of mark or impression made on a document or object, often for legal or official purposes, using a stamp.

Bearer Instrument

A negotiable financial instrument that entails possession of the document itself confers ownership and thus, the entitlement to payment.

Special Indorsement

A type of endorsement on a negotiable instrument that specifies the person to whom, or to whose order, the instrument is payable.

Indorsement

The act of signing the back of a financial instrument, thereby transferring ownership or validating the document.