\begin{tabular}{lll}
\hline$\$ 20$ & 0 & 12 \
$\$ 18$ & 2 & 10 \
$\$ 16$ & 2 & 8 \
$\$ 14$ & 3 & 6 \
$\$ 12$ & 4 & 4 \
$\$ 10$ & 5 & 2 \
$\$ 8$ & 6 & 0
\end{tabular}

Which of the following is a binding (in other words, effective) price floor in this market?

Choose 1 answer:
(A) $\$ 8$
(B) $\$ 0$
(C) $\$ 10$
(D) $\$ 14$

Question

\begin{tabular}{lll}
\hline$\$ 20$ & 0 & 12 \
$\$ 18$ & 2 & 10 \
$\$ 16$ & 2 & 8 \
$\$ 14$ & 3 & 6 \
$\$ 12$ & 4 & 4 \
$\$ 10$ & 5 & 2 \
$\$ 8$ & 6 & 0
\end{tabular}

Which of the following is a binding (in other words, effective) price floor in this market?

Choose 1 answer:
(A) $\$ 8$
(B) $\$ 0$
(C) $\$ 10$
(D) $\$ 14$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Floor: A price floor is a minimum price set by the government or a regulatory authority, below which the price of a good or service is not allowed to fall. ‖ ‖ b ⋮ Binding Price Floor: A price floor is considered binding (or effective) if it is set above the equilibrium price, causing a surplus in the market. ‖ ‖ c ⋮ Equilibrium Price: From the table, the equilibrium price can be identified where the quantity demanded equals the quantity supplied. Here, the equilibrium price is $12, where the quantity demanded and supplied are both 4. ‖ ‖ d ⋮ Analysis of Options: - Option A ($8): This is below the equilibrium price, so it is not binding. - Option B ($0): This is not a valid price floor. - Option C ($10): This is below the equilibrium price, so it is not binding. - Option D ($14): This is above the equilibrium price, making it a binding price floor. ‖ ∻Answer∻ ⚹ D ($14) ⚹ ∻Key Concept∻ ⚹ Binding Price Floor ⚹ ∻Explanation∻ ⚹ A binding price floor is set above the equilibrium price, causing a surplus in the market. In this case, $14 is the only price above the equilibrium price of $12, making it the effective price floor. ⚹◊What impact would a price floor have on the quantity supplied in this market based on the information provided in the table⍭ Generate me a similar question◊

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