Which one of the following statements is TRUE?
A) An effective price ceiling results in a surplus of the good.
B) An effective price floor results in a shortage of the good.
C) When the market clearing price of a good is the equilibrium, then everyone can afford it.
D) The market clearing price of a good reflects its relative scarcity.

Question

Quizplus · Accepted Answer

The market clearing price, also known as the equilibrium price, is the price at which the quantity supplied equals the quantity demanded. This price reflects the relative scarcity of a good because it balances the available supply with consumer demand. If a good is scarce, its price tends to be higher, indicating a higher level of scarcity. Conversely, if a good is abundant, its price tends to be lower, indicating a lower level of scarcity. Choices A and B are incorrect because an effective price ceiling typically results in a shortage (not a surplus), and an effective price floor typically results in a surplus (not a shortage). Choice C is incorrect because the market clearing price being the equilibrium does not necessarily mean everyone can afford the good; it simply means the quantity supplied equals the quantity demanded at that price.

Which One of the Following Statements Is TRUE