A price floor is a situation where the
A) price is not allowed to rise above a certain level.
B) price is not allowed to fall below a certain level.
C) price is not allowed to change.
D) quantity is not allowed to fall below a certain level.
E) quantity is not allowed to rise above a certain level.

Question

Quizplus · Accepted Answer

A price floor is a legal minimum price set by the government above the equilibrium market price. It is implemented in order to protect producers and suppliers by ensuring they receive a higher price for their goods or services. The price floor creates a surplus of supply, as suppliers may produce more than what consumers are willing to buy at that price. As a result, the price is forbidden to fall below the level determined by the price floor. Choice B is the only option that correctly describes a price floor.

A Price Floor Is a Situation Where the