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A government sets a legal minimum on the wage an employer may pay. What is the technical term for this kind of price control, and can an employer legally pay less than it?
AA price ceiling; employers may not pay less than it
BA price floor; employers may not pay more than it
CA price ceiling; employers may not pay more than it
DA price floor; employers may not pay less than it
Answer & Solution
Correct answer: D. A price floor; employers may not pay less than it
1. A price floor is defined as a legal minimum price, and the minimum wage is the leading real-world example.
2. By keeping the wage from falling below a set level, it stops employers from legally paying less.
3. A price ceiling works the opposite way, setting a legal maximum instead.
4. So options A and C, which describe a ceiling, name the wrong control.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 3 "Demand and Supply", section 3.4 | Price Ceilings and Price Floors_
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