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Questions and Answers
Price floors are set above equilibrium prices to keep prices from going too low
Price floors are set above equilibrium prices to keep prices from going too low
True (A)
Price floors are a form of government intervention in the market
Price floors are a form of government intervention in the market
True (A)
Price floors create surpluses of goods in the market
Price floors create surpluses of goods in the market
True (A)
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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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