A Binding Price Floor

question 101

Multiple Choice

A binding price floor:

• A) will cause quantity demanded to exceed quantity supplied.
• B) will cause quantity supplied to exceed quantity demanded.
• C) will increase total well-being.
• D) will set a legal maximum price in a market.

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Definitions:

Marginal Cost

The swell in overall financial outlay resulting from the crafting of an extra unit of a good or service.

Profit-Maximization

A business objective to achieve the highest possible profit through managing revenues and expenses, often central to the decisions made by firms.

Competitive Firms

Businesses operating in a market where they compete with others for customers, each with minimal influence over market prices.

Monopolies

Market situations in which a single supplier dominates the supply of a good or service, with no close substitutes.