A price-ceiling is binding if and only if it imposed _____ the equilibrium price while a price floor is binding if and only if it is imposed ______ the equilibrium price.
A) above, above.
B) below; below.
C) above; below.
D) below; above.

Question

Quizplus · Accepted Answer

A price ceiling is binding when it is set below the equilibrium price, preventing prices from rising to their natural equilibrium level. Conversely, a price floor becomes binding when it is set above the equilibrium price, preventing prices from falling to their natural equilibrium level.

A Price-Ceiling Is Binding If and Only If It Imposed