Producers may supply a good with inefficiently high quality if the government imposes a:
A)price ceiling set above the equilibrium price.
B)price floor set below the equilibrium price.
C)binding price floor.
D)binding price ceiling.

Question

Quizplus · Accepted Answer

A binding price floor, set above the equilibrium price, can lead to producers supplying a good with inefficiently high quality as they try to compete on factors other than price, given that they cannot sell the good for a lower price due to the price floor.

Producers May Supply a Good with Inefficiently High Quality If