Producers may supply a good with inefficiently high quality if the government imposes:
A) a price ceiling set above the equilibrium price.
B) a price floor set below the equilibrium price.
C) a binding price floor.
D) a binding price ceiling.

Question

Quizplus · Accepted Answer

A binding price floor, set above the equilibrium price, can lead producers to supply a good with inefficiently high quality as they try to attract buyers in a market where the price cannot fall to clear excess supply.

Producers May Supply a Good with Inefficiently High Quality If