Reference: Ref 8-3 (Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.
A) price floor; $31
B) price floor; $17
C) price ceiling; $10
D) price ceiling; $17

Question

Reference: Ref 8-3 (Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.
A) price floor; $31 
B) price floor; $17 
C) price ceiling; $10 
D) price ceiling; $17

Quizplus · Accepted Answer

The figure shows a scenario where the government has imposed a price ceiling. This is because the price control is resulting in a shortage of goods, which is typical of a price ceiling. The shortage is the difference between the quantity demanded and the quantity supplied, which is 15 units. Therefore, the price ceiling is set at the maximum price allowed, which is $10. Options A and B are incorrect because a price floor would result in a surplus, not a shortage. Option D is incorrect because the figure clearly shows a price ceiling, not a price floor.

Reference: Ref 8-3 (Figure: Government Price Controls) Refer to the Figure