A binding price ceiling creates?
Correct answer: C. a shortage
- A. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price
- B. a surplus
- C. a shortage
- D. an equilibrium
Explanation
A binding price ceiling is set below equilibrium, so the quantity demanded exceeds the quantity supplied. This creates a shortage, whereas a surplus results from a binding price floor.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
A price floor ?
Which side of the market is more likely to lobby government for a price floor ?
Which of the following is an example of price floor ?
For which of the following products would the burden of a tax likely fall more heavily on the sellers ?
The burden of a tax falls more heavily on the buyers in a market when ?
The burden of a tax falls more heavily on the sellers in a market when ?