A Price Floor of $23 Placed on the Market in the Graph

question 115

Multiple Choice

A price floor of $23 placed on the market in the graph shown:

• A) is binding, and causes a shortage.
• B) is non-binding, and does not affect the market.
• C) is binding, and causes a surplus.
• D) is non-binding, and does not prevent the market from reaching equilibrium.

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Definitions:

Caitlin's Producer Surplus

The difference between what a producer (in this case, Caitlin) actually receives for selling a good and the minimum they would be willing to accept.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive, measured by the area above the supply curve and below the market price.

Whitewater Rafting

A recreational outdoor activity which uses an inflatable raft to navigate through rough or whitewater rivers.

Producer Surplus

The difference between the amount a producer is willing to accept for a good or service and the actual amount received from selling it at the market price.