A price ceiling is a legal maximum on the price at which a good can be sold. It is imposed to prevent prices from becoming too high, typically in markets where the government believes that the market equilibrium price (the price at which supply equals demand) would be prohibitively expensive for consumers.

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A Price Ceiling

Question 67

Multiple Choice

A price ceiling:

A) is the lowest price that the law will allow to be charged in the market.
B) is the highest price that the law will allow to be charged in the market.
C) is the price that must be charged in the market.
D) would be imposed if the government believes the market equilibrium price is too low.

Correct Answer: