A government-set price floor on a product
A) does not interfere with the rationing function of price in a market system.
B) will drive resources away from the production of the product.
C) will attract more resources toward the production of the product.
D) is intended to benefit the buyers of the product.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price for a product. It is intended to benefit the producers of the product by ensuring that they receive a fair price for their goods. A price floor will attract more resources toward the production of the product, as producers will be more likely to produce the product if they know they will receive a fair price for it.

A Government-Set Price Floor on a Product