Which of the following is an example of an objection related to price ceilings?

• A. Price floors eliminate the need for government intervention in markets.
• B. Price floors always result in increased consumer surplus.
• C. Price ceilings can lead to shortages by setting prices below equilibrium.
• D. Price ceilings guarantee that all consumers will receive the good.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what a price ceiling is — it is a government-imposed limit on how high a price can be charged for a good or service, typically set below the market equilibrium price to make the good more affordable.
2. Step 2: Recognize the common objections related to price ceilings, such as the fact that setting a price below equilibrium can cause the quantity demanded to exceed the quantity supplied, leading to shortages.
3. Step 3: Analyze each option by relating it to the concept of price ceilings: determine whether the statement correctly identifies a typical consequence or objection of price ceilings.
4. Step 4: Identify that the statement 'Price ceilings can lead to shortages by setting prices below equilibrium' correctly describes a well-known objection to price ceilings, as shortages occur when demand exceeds supply at the imposed price.
5. Step 5: Confirm that other options either refer to price floors or make incorrect claims about price ceilings, so the correct objection related to price ceilings is the one about shortages caused by prices set below equilibrium.