A price ceiling is
A)a minimum price set by government.It causes a surplus if effective.
B)a maximum price set by government.It causes a shortage if effective.
C)the equilibrium price.
D)a maximum price set by government.It causes a surplus if effective.
E)a minimum price set by government.It causes a shortage if effective.

Question

Quizplus · Accepted Answer

A price ceiling is a maximum price set by the government, meaning that no prices above this level are allowed. If this price ceiling is effective, it creates an artificial shortage. This is because at the maximum price, quantity demanded exceeds quantity supplied, meaning that consumers will want to buy more of the product than suppliers are willing to sell at that price.

A Price Ceiling Is