The persistent unwanted surplus that results from a binding price floor causes inefficiencies that do NOT include:
A)inefficiently low quality.
B)inefficient allocation of sales among sellers.
C)wasted resources.
D)the temptation to break the law by selling below the legal price.

Question

Quizplus · Accepted Answer

A binding price floor, such as a minimum wage, typically leads to a surplus because it sets the price above the equilibrium, causing quantity supplied to exceed quantity demanded. This does not inherently lead to inefficiently low quality; instead, it may cause inefficient allocation of sales among sellers, wasted resources, and the temptation to break the law by selling below the legal price. Quality issues are more associated with price ceilings, where too low of a price can lead to poor quality as producers cut costs.

The Persistent Unwanted Surplus That Results from a Binding Price