Asked by Haley Smith on Jul 05, 2024
Verified
A binding price ceiling is usually designed to:
A) keep prices below the equilibrium level.
B) increase the quality of the good.
C) prevent shortages.
D) increase efficiency.
Equilibrium Level
A situation where the balance between the market's supply and demand stabilizes prices.
Binding Price Ceiling
A maximum legal price set below the equilibrium price, leading to shortages as demand exceeds supply.
Increase Efficiency
The process of improving the effectiveness of an operation, system, or process by maximizing output with the minimal amount of input or effort.
- Analyze the consequences of state measures on the market, including the imposition of price caps beneath the equilibrium price.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
A
Explanation :
A binding price ceiling is a government-imposed limit on the maximum price that can be charged for a good or service. This is typically done to keep prices below the equilibrium level in order to make the good more affordable for consumers. If the ceiling is set too low, it can lead to shortages, but the intent is to help consumers by preventing them from being priced out of the market. The goal is not to increase efficiency or quality, but rather to make the good more accessible to a larger number of consumers.
Learning Objectives
- Analyze the consequences of state measures on the market, including the imposition of price caps beneath the equilibrium price.