FIGURE 5-3 -Refer to Figure 5-3.To be effective,a price floor must lie A)above P₁ but below P₂. B)anywhere above P₁. C)below P₁ but above P₃. D)anywhere below P₁. E)within the boundaries of P₂ and P₃.

Question

Quizplus · Accepted Answer

A price floor is effective when it is set above the equilibrium price (P1), as it prevents the price from falling to the equilibrium level, creating a surplus.

FIGURE 5-3 -Refer to Figure 5-3.To Be Effective,a Price Floor Must Lie