Which of the following is a characteristic of a market where a price floor is in place?
A)The market quantity demanded exceeds the market quantity supplied.
B)Fewer regulations are needed since the government sets the price.
C)Fewer units are purchased than would be the case without the price floor.
D)A smaller number of sellers than in markets without price floors.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price that is above the equilibrium price. In such a market, fewer units are purchased than would be the case without the price floor because the higher price reduces demand and increases supply, leading to a surplus of goods. Choice A is incorrect because a market with a price floor will have excess supply, not excess demand. Choice B is incorrect because price floors actually require more regulations since the government has to enforce the minimum price. Choice D is incorrect because the number of sellers is not directly affected by the presence of a price floor.

Which of the Following Is a Characteristic of a Market