A binding price floor:

Question

Quizplus · Accepted Answer

A binding price floor is a legal minimum price set above the equilibrium price in a market. This means that at the price floor, suppliers will offer more products than consumers are willing to buy, creating a surplus (quantity supplied exceeds quantity demanded). Therefore, choice B is the correct answer. Choice A is incorrect because, with a price floor, quantity demanded will be lower than quantity supplied. Choice C is incorrect because a price floor can reduce total well-being in a market due to deadweight loss and reduced consumer surplus. Choice D is incorrect because a price floor sets a legal minimum price, not a legal maximum price.

A Binding Price Floor