If a price floor is not binding, then
A)the equilibrium price is above the price floor.
B)the equilibrium price is below the price floor.
C)there will be a surplus in the market.
D)Both (a) and (c) are correct.

Question

If a price floor is not binding, then
A)​the equilibrium price is above the price floor.
B)​the equilibrium price is below the price floor.
C)​there will be a surplus in the market.
D)​Both (a) and (c) are correct.

Quizplus · Accepted Answer

If a price floor is not binding, it means that the equilibrium price is already higher than the price floor. In such a case, the price floor has no effect on the market outcome as the market is already naturally producing a higher price. Therefore, neither a surplus nor a shortage will occur.

If a Price Floor Is Not Binding, Then