A price floor is a government-imposed regulation that prevents the price of a good or service from falling below a certain level or minimum price. It sets a legal minimum on the price at which a good can be sold. It is only binding if it is set above the equilibrium price.

Solved

A Price Floor

Question 16

Multiple Choice

A price floor

A) always determines the price at which a good must be sold.
B) sets a legal maximum on the price at which a good can be sold.
C) is not a binding constraint if it is set above the equilibrium price.
D) sets a legal minimum on the price at which a good can be sold.

Correct Answer: