The nation of Gatorland has passed a law that nobody shall sell anchovies for less than $\$ 20$ per pound. Nobody really cares, however, because the equilibrium price of anchovies in Gatorland is $\$ 25$ per pound.

What is the term for the price control described above?

Choose 1 answer:
(A) A binding price floor
(B) A binding price ceiling
(c) A tariff
(D) A non-binding price floor
(E) A non-binding price ceiling

Question

The nation of Gatorland has passed a law that nobody shall sell anchovies for less than $\$ 20$ per pound. Nobody really cares, however, because the equilibrium price of anchovies in Gatorland is $\$ 25$ per pound.

What is the term for the price control described above?

Choose 1 answer:
(A) A binding price floor
(B) A binding price ceiling
(c) A tariff
(D) A non-binding price floor
(E) A non-binding price ceiling

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Floor: A price floor is a minimum price set by the government that must be paid for a good or service. ‖ ‖ b ⋮ Non-Binding Price Floor: A non-binding price floor is set below the equilibrium price, meaning it has no effect on the market because the market price is already higher. ‖ ‖ c ⋮ Equilibrium Price: The equilibrium price of anchovies in Gatorland is $25 per pound, which is higher than the price floor of $20 per pound. ‖ ‖ d ⋮ Conclusion: Since the price floor is below the equilibrium price, it does not affect the market. ‖ ∻Answer∻ ⚹ (D) A non-binding price floor ⚹ ∻Key Concept∻ ⚹ Non-Binding Price Floor ⚹ ∻Explanation∻ ⚹ A non-binding price floor is set below the equilibrium price, meaning it does not affect the market price. In this case, the equilibrium price of anchovies is $25 per pound, which is higher than the price floor of $20 per pound, making the price floor non-binding. ⚹◊What impact would removing the price control on anchovies have on the market in Gatorland?⍭ Generate me a similar question◊

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