Suppose the market equilibrium price for cigarettes is $20 before the government introduced a $22 price floor.This price floor will not be binding as it is above market price.

Question

Quizplus · Accepted Answer

A price floor set above the market equilibrium price is binding because it sets a minimum price that is higher than what the market would naturally settle at, leading to potential surpluses as suppliers are willing to sell more at the higher price, but demand may decrease due to the increased price.

Suppose the Market Equilibrium Price for Cigarettes Is $20 Before