A price floor ?
Correct answer: D. sets a legal minimum on the price at which a good can be sold
- A. always determines the price at which a good must be sold
- B. sets a legal maximum on the price at which a good can be sold
- C. is not a binding constraint if it is set above the equilibrium price
- D. sets a legal minimum on the price at which a good can be sold
Explanation
A price floor establishes the lowest legal price at which a good or service may be sold. It affects the market only when set above the equilibrium price, unlike the incorrect statement that it is always binding.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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