The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5

-Which of the following is not an example of a price ceiling?
A)The Chinese government sets the price of housing in China below equilibrium.
B)The government of the former Soviet Union sets the price on food below those prevailing in the free market.
C)In the 1970s, the Nixon administration imposed wage and price controls, thereby keeping wages and prices from rising.
D)In the late 1970s, the U.S. government required gasoline to be sold at a price per gallon that was below what would have prevailed in a free market.
E)The U.S. government requires that sugar be sold at a price that exceeds the world price of sugar.

Question

The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5
 
-Which of the following is not an example of a price ceiling?
A)The Chinese government sets the price of housing in China below equilibrium. 
B)The government of the former Soviet Union sets the price on food below those prevailing in the free market. 
C)In the 1970s, the Nixon administration imposed wage and price controls, thereby keeping wages and prices from rising. 
D)In the late 1970s, the U.S. government required gasoline to be sold at a price per gallon that was below what would have prevailed in a free market. 
E)The U.S. government requires that sugar be sold at a price that exceeds the world price of sugar.

Quizplus · Accepted Answer

The statement in option E describes an example of a price floor, not a price ceiling. A price floor is a minimum price set by the government above the equilibrium price, while a price ceiling is a maximum price set by the government below the equilibrium price.

The Table Given Below Reports the Quantity Demanded and Supplied