Asked by Marvelous Abraham on Jul 03, 2024
Verified
A price floor in a competitive market will result in persistent shortages of a product.
Price Floor
A legally established minimum price for a good, or service. Normally set at a price above the equilibrium price.
Competitive Market
A market structure characterized by a large number of buyers and sellers, free entry and exit, and a high level of competition.
Persistent Shortages
An economic condition where the demand for a good or service consistently exceeds its supply, often due to factors like price controls, causing prolonged scarcity.
- Understand the consequences of implementing price ceilings and price floors on market equilibrium dynamics.
Verified Answer
GC
Giovanni CuellarJul 10, 2024
Final Answer :
False
Explanation :
A price floor, when set above the equilibrium price, typically results in a surplus of a product because it sets the price higher than what consumers are willing to pay, leading to excess supply.
Learning Objectives
- Understand the consequences of implementing price ceilings and price floors on market equilibrium dynamics.