Which of the following would not interfere with market equilibria?
A. a minimum wage
B. a rent control
C. a non-binding price floor
D. a binding price ceiling
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Sra
To determine which option would not interfere with market equilibria, we first need to understand what market equilibrium means. Market equilibrium occurs when the quantity demanded by buyers matches the quantity supplied by sellers at a given price. In this situation, there is no excess supply or demand in the market.
Now let's analyze each option to see which one would not interfere with market equilibria:
A. Minimum Wage: A minimum wage is a legally mandated wage rate that employers must pay their employees. This intervention affects the labor market by setting a price floor on wages. Since it artificially raises the wage rate above the market equilibrium level, it would interfere with market equilibria by creating excess supply of labor (unemployment).
B. Rent Control: Rent control refers to government regulations that limit how much landlords can charge for rent. By imposing price ceilings on rental rates, rent control interferes with market equilibria. It can create a shortage of rental units and lead to inefficient allocation of housing resources.
C. Non-binding Price Floor: A non-binding price floor refers to a price floor that is set above the equilibrium price but has no effect on the market since it is already operating below that level. Since it does not impact the market equilibrium, it would not interfere with market equilibria.
D. Binding Price Ceiling: A binding price ceiling refers to a price limit set below the equilibrium price, which creates a maximum price that cannot be exceeded. This intervention interferes with market equilibria by creating excess demand (shortage) since the quantity demanded exceeds the quantity supplied at the lower price.
Based on the analysis, option C, a non-binding price floor, would not interfere with market equilibria. Options A, B, and D would all interfere with market equilibria in different ways.