Question

QUESTION 13 5 points Saved Figure 6-4 20 1 Price Supply Demand TE> 16 18 20 Quantity 2 4 6 8 10 12 14 Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a (i) binding price ceiling. non-binding price ceiling. (111) binding price floor. (iv) non-binding price floor. a. (ii) and (iii) only b. (ii) only O c. (i) and (iv) only d. (i) only

Answer 1

(i) and (iv) only

A government-imposed price of $6 in this market could be an example of binding price ceiling and non binding price floor.

A binding price ceiling occurs when the government sets a required price on goods at a price below equilibrium. Since the government requires the price not rise above this price, that price bind the market for good.

Non binding price floor is one that is lower than the equilibrium market price.

So when government imposes price of $6 i.e, below equilibrium price $10 it is an example of a binding price ceiling and non binding price floor.