If the government removes a binding price floor from a market,then the price received by sellers will
A)decrease,and the quantity sold in the market will decrease.
B)decrease,and the quantity sold in the market will increase.
C)increase,and the quantity sold in the market will decrease.
D)increase,and the quantity sold in the market will increase.

Question

Quizplus · Accepted Answer

A binding price floor is a minimum price set by the government that is above the equilibrium price. This creates a surplus of the product because the quantity supplied exceeds the quantity demanded at the higher price. When the government removes the binding price floor, the market will move towards equilibrium. This means that the price received by sellers will decrease because they can no longer charge the higher government-mandated price. However, as the price falls, the quantity demanded will increase, and the quantity supplied will decrease since some suppliers will exit the market due to the lower price. Overall, the quantity sold in the market will increase as the market moves towards equilibrium. Therefore, the best answer is B.

If the Government Removes a Binding Price Floor from a Market,then