A nonbinding price floor (i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)
Is set at a price below the equilibrium price.

Question

Quizplus · Accepted Answer

A nonbinding price floor is a price control set above the equilibrium price, but it does not interfere with market forces because it doesn't affect the market outcome. Therefore, it has no impact on the quantity demanded, supplied, or the equilibrium price, and there is no surplus or shortage. Hence, the correct option is (iv) only, i.e., a nonbinding price floor is set below the equilibrium price.

A Nonbinding Price Floor (I)causes a Surplus