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

Question

Quizplus · Accepted Answer

A price ceiling is a maximum allowable price set by the government, meaning that prices cannot exceed this level. This creates a price cap, which can lead to a shortage of goods or services because suppliers will not be able to produce enough quantity to meet demand at the artificially low price. This is opposed to a price floor, which sets a minimum allowable price and can cause a surplus if effective.

A Price Ceiling Is