(Figure: Price Control) Use Figure: Price Control. One effective price ceiling would be the price indicated at point _____, and there would be a _____ equal to the difference between points _____.
A) b; surplus; f and e
B) b; shortage; f and e
C) d; shortage; i and h
D) d; surplus; e and h

Question

(Figure: Price Control) Use Figure: Price Control. One effective price ceiling would be the price indicated at point _____, and there would be a _____ equal to the difference between points _____. 
A) b; surplus; f and e 
B) b; shortage; f and e 
C) d; shortage; i and h 
D) d; surplus; e and h

Quizplus · Accepted Answer

A price ceiling is a government-imposed limit on how high a price can be charged for a product or service. In this diagram, D is the highest price consumers are willing to pay and S is the lowest price producers are willing to accept. A price ceiling set at point D would be ineffective as it would not prevent producers from raising the price above the ceiling. A price ceiling set at point F would result in a shortage of the product as the quantity demanded (Qd) exceeds the quantity supplied (Qs). Thus, the effective price ceiling would be set at point H, where the demand curve intersects with the supply curve. The difference between points H and I represents the shortage that would result from the price ceiling. Therefore, the correct answer is C.