Consider a perfectly competitive market with a binding price floor. Which of the following is true?
a. The quantity traded in this market is less than the efficient level.
b. The quantity traded in this market is greater than the efficient level.
c. The quantity traded in this market equals the efficient level.
d. The quantity traded in this market equals the equilibrium quantity under perfect competition.
e. None of the above.
The term efficient level is an economic concept that helps to determine the optimal production, consumption, or exchange level in a market. It is usually derived with the intersection of the market demand and supply curve.
Answer and Explanation: 1
- The correct option is b. The quantity traded in this market is greater than the efficient level.
In a perfectly competitive market, a price floor...
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fromChapter 3 / Lesson 55
Explore price floors in economics. Learn the definition of a price floor and understand why it is set. Discover the effects of price floors with examples.