To be binding,a price floor must be set:
A)lower than the equilibrium price.
B)higher than the equilibrium price.
C)so that quantity demanded exceeds quantity supplied.
D)lower than the equilibrium price and so that quantity demanded exceeds quantity supplied.

Question

Quizplus · Accepted Answer

A price floor must be set higher than the equilibrium price to be binding. If the price floor is set lower than the equilibrium price or at the equilibrium price, it would not affect the market. Additionally, a price floor is only binding if it creates a surplus, where quantity supplied exceeds quantity demanded.

To Be Binding,a Price Floor Must Be Set