Asked by Bailey Rayoum on Jul 18, 2024
Verified
If the equilibrium price of corn is $3 a bushel and the government imposes a floor of $4 a bushel,the price of corn will _______________________.
A) increase to $4
B) remain at $3
C) rise to about $3.50
D) be impossible to determine
Equilibrium Price
The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a situation where there is no tendency for the price to change unless external factors intervene.
Government Imposes
Measures or regulations put in place by the government that can impact various aspects of economic and social life.
- Elucidate the impact of price ceilings and price floors on the equilibrium of the market.
Verified Answer
MF
MBA FT 2018-20Jul 19, 2024
Final Answer :
A
Explanation :
When the government imposes a price floor above the equilibrium price, the market price will increase to the level of the price floor, in this case, $4 a bushel.
Learning Objectives
- Elucidate the impact of price ceilings and price floors on the equilibrium of the market.