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Unformatted text preview: the equilibrium price in the market is $500, this would be a binding price ceiling. b. For this example, a $700 price floor would cause a surplus of 4,000 bicycles. A price floor is binding if it is set at any price above equilibrium price. Since the equilibrium price in the market is $500, this would be a binding price floor. c. More than one reason may exist for policymakers to impose a price ceiling or price floor in a market. Often this is done in an attempt to increase equity....
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- Fall '08