To be binding,a price floor must be set:
A) lower than the equilibrium price.
B) higher than the equilibrium price.
C) so that quantity demanded exceeds quantity supplied.
D) lower than the equilibrium price,so that quantity demanded exceeds quantity supplied.

Question

Quizplus · Accepted Answer

A price floor is a government-imposed minimum price that is higher than the equilibrium price. By setting a price floor higher than the equilibrium price, the government aims to increase the income of producers and encourage them to produce more. This can lead to a surplus of goods that are not purchased because the price is too high for consumer demand.

To Be Binding,a Price Floor Must Be Set