A price floor is
A) the highest possible legal price that can be charged for a good or service.
B) usually equal to the equilibrium price established before the government imposed the price floor.
C) the lowest legal price at which a good or service can be traded.
D) a legal price of zero that can be charged for a good or service.
E) almost always equal to the price ceiling.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price that is set above the equilibrium price, meaning it is the lowest legal price at which a good or service can be traded. This is intended to protect producers from receiving too low of a price, but can lead to a surplus of the product if the floor is set above the equilibrium price. Choices A, B, D, and E are incorrect because they do not accurately describe a price floor.

A Price Floor Is