For a price floor to be binding,it must be set
A)very low.
B)at the free-market equilibrium price.
C)below the free-market equilibrium price.
D)at a level such that there exists some unsatisfied demand.
E)above the free-market equilibrium price.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price that must be paid for a good or service. For a price floor to be binding, it must be set above the free-market equilibrium price. If the price floor is set below the free-market equilibrium price, it will have no effect on the market, and if it is set at the free-market equilibrium price, there will be no need for a price floor. When the price floor is set above the equilibrium price, it results in a surplus of the good or service and causes inefficiencies in the market.

For a Price Floor to Be Binding,it Must Be Set