Which of the following is an example of a price floor?

• A. A tax on imported goods
• B. The minimum wage law
• C. A subsidy for farmers
• D. A limit on price increases during emergencies

Answer: (B)

A price floor is a minimum price set by the government that must be paid for a good or service, preventing prices from falling below a certain level. The minimum wage law serves as a compelling example of a price floor because it establishes the lowest legal salary that businesses must pay their employees. By doing so, it aims to ensure workers receive a fair wage that is above the market equilibrium price for labor, thus preventing exploitation and providing a basic standard of living.

In contrast, the other options do not represent price floors. A tax on imported goods influences the price of these goods by increasing their cost, which can lead to higher prices but is not a minimum price requirement. A subsidy for farmers provides financial support to increase their income or lower the prices of their goods, rather than establishing a minimum price. A limit on price increases during emergencies regulates how much prices can rise, but it does not set a minimum price threshold.