Asked by Pinky Melon on May 04, 2024
Verified
An effective price floor must be set
A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or below the equilibrium price.
Price Floor
A government or regulatory minimum price set above the equilibrium price, preventing the market price from falling below it.
Equilibrium Price
The market price at which the quantity of a good or service supplied is equal to the quantity demanded.
- Absorb the theories of price ceilings and price floors, particularly their role in influencing market balance.
Verified Answer
SS
suthasinee sridetMay 07, 2024
Final Answer :
A
Explanation :
An effective price floor, which is a government- or group-imposed price control, must be set above the equilibrium price to have an impact. If set at or below the equilibrium price, the market forces would naturally drive the price to the equilibrium level, rendering the price floor ineffective.
Learning Objectives
- Absorb the theories of price ceilings and price floors, particularly their role in influencing market balance.