Multiple Choice
Which of the following best explains how the short-run consequences of price ceilings on bread are magnified in the long run?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Price Ceilings, Price Floors, and Black Markets
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Price ceilings typically affect which of the following?
A
The equilibrium price determined by supply and demand
B
The quantity supplied always exceeds the quantity demanded
C
The maximum legal price that can be charged for a good or service
D
The minimum legal price that can be charged for a good or service
Verified step by step guidance1
Understand the definition of a price ceiling: it is a government-imposed limit on how high a price can be charged for a good or service.
Recognize that a price ceiling sets a maximum legal price, meaning sellers cannot charge more than this price.
Recall that price ceilings are typically set below the equilibrium price to be effective; otherwise, they have no impact.
Analyze the effects of a price ceiling: it can lead to shortages because at the lower price, quantity demanded exceeds quantity supplied.
Distinguish price ceilings from price floors, which set minimum legal prices, and understand that price ceilings do not determine equilibrium prices but restrict prices from rising above a certain level.
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Price Ceilings, Price Floors, and Black Markets practice set
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