Refer to Figure 6-13. Which of the following price floors would be binding in this market?
a. $3
b. $4
C. $5
d. $6
Answer: d. $6.
Price floor is binding when it is above equilibrium because it is minimum price and if it is below equilibrium then anyone can charge than that the market price will be the equilibrium and no need of price floor
the equilibrium is at
$5 so the price above it is binding
it is $6
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A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30 . Which of the following should the firm do to increase profit?
a. Raise price and lower output. b. Lower price and lower output. c. Raise price and raise output. d. Lower price and raise output. e. Lower output but leave price unchanged.
An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment
a. True b. False Indicate whether the statement is true or false