Which of the following determines the maximum legal price at which a product can be sold in a market?

• A. A price ceiling imposed by the government
• B. The equilibrium price set by supply and demand
• C. A price floor established by producers
• D. Consumer willingness to pay

Answer: (A)

Verified step by step guidance

1. Understand the concept of a price ceiling: it is a maximum legal price set by the government that sellers cannot exceed when selling a product.
2. Recognize that the equilibrium price is determined by the intersection of supply and demand, but it is not a legal limit; it is a market outcome.
3. Know that a price floor is a minimum legal price, which sets a lower bound, not an upper bound, on prices.
4. Consumer willingness to pay reflects demand preferences but does not legally restrict prices.
5. Conclude that the maximum legal price at which a product can be sold is determined by a price ceiling imposed by the government.