If the equilibrium price for some product is $1000,a price ceiling of $1200 will result in
A)the same general effects as a price ceiling of $600.
B)the same general effects as an administered price of $1200.
C)the same general effects as a price floor of $1200.
D)massive surpluses of the good.
E)no effects because the price ceiling is not binding at that price.

Question

Quizplus · Accepted Answer

A price ceiling is only effective if it is lower than the equilibrium price, as it sets a maximum price that sellers can charge. In this case, the equilibrium price is $1000, and a price ceiling of $1200 is not binding, meaning it has no effect on the market price or quantity exchanged. Therefore, the answer is E, as there are no general effects in this scenario.

If the Equilibrium Price for Some Product Is $1000,a Price