A binding price floor
I.causes a surplus.
II.causes a shortagE.
iii.is set at a price above the equilibrium pricE.
iv.
Is set at a price below the equilibrium pricE.
A)(i) only
B)(iii) only
C)(i) and (iii) only
D)(ii) and (iv) only

Question

A binding price floor 
I.causes a surplus.
II.causes a shortagE.
iii.is set at a price above the equilibrium pricE.
iv.
Is set at a price below the equilibrium pricE.​
A)​(i) only
B)​(iii) only
C)​(i) and (iii) only
D)​(ii) and (iv) only

Quizplus · Accepted Answer

A binding price floor is set at a price above the equilibrium price and causes a surplus. Therefore, options (i) and (iii) are correct. Option (iv) is incorrect as it states that the price floor is set below the equilibrium price. Option (ii) is also incorrect as a price floor above the equilibrium price causes a surplus, not a shortage. Therefore, (i) and (iii) are correct and the answer is (C).

A Binding Price Floor