pricing

Question 1

explain price floors

Answer 1

max prices set below the free market equilibrium to be effective. they encourage prod by making a good not too expensive to produce

Question 2

benefits max price

Answer 2

• prevent monopolies exploiting consumers (roaming charges)

- could increase efficiency in firms-incentive to keep prices low

Question 3

disadvantages of a maximum price

Answer 3

• can lead to failiure if government misjudge what the optimum price should be
• could increase price of other goods from firm, since their profits will be lower with a max price. maybe no net gain for consumer

Question 4

advantages minimum price

Answer 4

incentivising production of a good