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    Price floor and Opportunity Cost

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    1. What entity establishes a price floor and does it require government sanction for violators? Will it result in a surplus or a shortage?

    2.Define equilibrium in terms of the following:
    -The plans of suppliers and demanders
    -The budget line and the indifference curve.

    3. What does the concept of opportunity cost indicate? Consider how the production of one good affects the possible production level of other goods.

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    Solution Preview

    1. Price floor is established by the government, usually to protect the internal industries from being wiped out by cheap goods coming from overseas. This is because if some foreign country has a competitive advantage due to cheap labour in the production of some commodity, it can flood the ...

    Solution Summary

    The expert examines price floor and opportunity costs for equilibrium.