Questions and Answers
Price floors are set above equilibrium prices to keep prices from going too low
True
Price floors are a form of government intervention in the market
True
Price floors create surpluses of goods in the market
True
Study Notes
Price Floors
- Price floors are set above the equilibrium price to prevent prices from falling below a certain level.
- They are a form of government intervention in the market, aimed at influencing the market outcome.
- As a result, price floors create a surplus of goods in the market, as producers are incentivized to supply more than what consumers are willing to buy.
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