When the government imposes a binding price floor, it causes

Question

BlackTom AI · Accepted Answer

Let's dissect what a binding price floor does in a market and evaluate each option one by one.
Option 1: 'the supply curve to shift to the left.' A binding price floor (a minimum price set above equilibrium) does not physically relocate the supply curve itself. Rather, it changes the quantity supplied and demanded at that price, creating a surplus, but the curve's position is determined by factors like input costs and technology. So this statement misattributes the effect to a curve shift.
Option 2: 'the demand curve to shift to the right.' Similar to the first option, a price floor does not cause the demand curve to move. The demand curve shifts with changes in income, prices of related goods, tastes, expectations, or number of buyers. A price floor fixes a price, not the underlying demand determinants, so this is incorrect.
Option 3: 'a shortage of the good to develop.' A shortage arises when quantity demanded exceeds quantity supplied, which is typical of a binding price ceiling (maximum price) below equilibrium, not a price floor above equilibrium. Since the floor keeps price high, demand falls relative to supply, leading to a surplus, not a shortage. This makes the option inaccurate for a binding price floor.
Option 4: 'a surplus of the good to develop.' This is the classic outcome of a binding price floor: setting a minimum price above the market-clearing price incentivizes producers to supply more while consumers buy less, creating excess supply or a surplus. This aligns with standard microeconomic theory and the intended constraint of a price floor above equilibrium.
In summary, options 1 and 2 misstate the effect as shifts in curves rather than changes in market outcomes, option 3 misattributes the outcome to a shortage, and option 4 correctly identifies the surplus that results from a binding price floor.

ECON 100 001/002/003/004 Markets and Government Policy

When the government imposes a binding price floor, it causes

View Explanation

Log in for full answers

Similar Questions

Figure 6-4 Graph (a) Graph (b) Refer to Figure 6-4. In graph (b), there will be

A price floor is

22. The price floor ( min price) creates excess supply (surplus)

If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay?

When a government sets a price floor, what is the expected outcome?

When a government sets a price floor, what is the expected outcome?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

ECON 100 001/002/003/004 Markets and Government Policy

When the government imposes a binding price floor, it causes

View Explanation

Log in for full answers

Similar Questions

Figure 6-4 Graph (a) Graph (b) ​ ​ Refer to Figure 6-4. In graph (b), there will be

A price floor is

22. The price floor ( min price) creates excess supply (surplus)

If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay?

When a government sets a price floor, what is the expected outcome?

When a government sets a price floor, what is the expected outcome?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Figure 6-4 Graph (a) Graph (b) Refer to Figure 6-4. In graph (b), there will be