The government of Macrostonia, a small dictatorship, restricts the price of automobiles to an amount less than or equal to $12,500 (a price below the equilibrium price). Such a policy would create a:
A)price floor.
B)price ceiling.
C)quota.
D)tariff.

Question

Quizplus · Accepted Answer

A price ceiling is a government-imposed limit on how high a price can be charged for a good or service, and in this case the government is restricting the price of automobiles to an amount below the equilibrium price, which is a price ceiling.

The Government of Macrostonia, a Small Dictatorship, Restricts the Price