Question

Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each.

Indicate whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.

Statement Price Control Binding or Not

1. The government has instituted a legal minimum price of $8 each for hamburgers.

2. The government prohibits fast-food restaurants from selling hamburgers for more than $8 each.

3. Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so.

Answer 1

price floor

Step-by-step explanation:

due to new regulations, fast food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so