What is a price floor and what are its economic effects?
Please provide the best answer for the statement.
A price floor means that the price is not allowed to fall below a minimum price set by government. If the price floor is set above the equilibrium price in a market, then there will a surplus of the product. A price floor interferes with the rationing function of price that serves to balance the decisions of suppliers and salamanders. The surplus indicates that resources are being over allocated to the production of this product and that there is economic inefficiency; output is being produced which consumers do not want to purchase at the price floor.
You might also like to view...
If people expect to have the profits from correct decisions confiscated but do not expect to be compensated for the losses from incorrect decisions, they will
A) attempt to maximize risk. B) only make choices when the outcomes are absolutely certain. C) try to do what most others are doing. D) undertake longer-range projects more frequently.
Which is likely to be larger, the velocity of M1 or M2?
A. M1, because M2 is a larger number. B. M2, because M1 is a larger number. C. The velocities of both are approximately equal. D. The numbers of velocity switch in relative size.
Society gains from a patent if the product would not otherwise be developed.
Answer the following statement true (T) or false (F)
In a perfectly competitive market in which all firms are maximizing their economic profits, the demand and supply curves intersect at a price of $8. From this we know that each
A) firm's average total cost of producing the good is $8. B) firm's average variable cost of producing the good is $8. C) firm's marginal cost of producing the good is $8. D) firm is earning positive economic profits at a price of $8 or more.