Which of the following is true of a price floor?
a. A price floor allows supply and demand to function effectively.
b. A price floor is set such that the price is not allowed to increase above a certain level.
c. A price floor is beneficial to buyers in a market.
d. A price floor usually creates a shortage of a good in a market.
e. A price floor is set such that the price is not allowed to decrease below a certain level.
e
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In the above figure for a monopolistically competitive firm, the total revenue at the profit-maximizing point is
A) $540. B) $840. C) $400. D) $880.
In order to survive, cartels must be able to enforce contracts. However, when a cartel is trading in an illegal commodity:
a. it can use the judicial system to enforce contracts. b. it relies on altruism of members to enforce contracts. c. it is inherently stable because the market is underground. d. violence becomes a means of contract enforcement. e. authorities are effective in preventing the trade.
The profit-maximizing rule of production is to produce the level of output where price is equal to marginal cost. Since the marginal cost (MC) curve is U-shaped, the price line running horizontal to the X-axis intersects the MC curve at two points. How is the profit maximization rule applied in this case?