If the equilibrium price for some product is $1000,a price ceiling of $800 will result in
A)the same general effects as a price ceiling of $1200.
B)the same general effects as a price ceiling of $600.
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

Since the equilibrium price is $1000 and the price ceiling is $800, the price ceiling is binding and will result in a shortage of the good. A price ceiling of $1200 would not have any effect since the equilibrium price is lower than that. A price floor of $1200 would result in a surplus of the good. The closest price ceiling that would result in the same general effects as the $800 price ceiling would be $600, which would also result in a shortage of the good.

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