The Consumer's Gain from the Imposition of a Price Ceiling

question 23

Multiple Choice

The consumer's gain from the imposition of a price ceiling is higher when:

• A) the own price elasticity of market demand is high and the price elasticity of market supply is high.
• B) the own price elasticity of market demand is high and the price elasticity of market supply is low.
• C) the own price elasticity of market demand is low and the price elasticity of market supply is high.
• D) the own price elasticity of market demand is low and the price elasticity of market supply is low.

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Definitions:

Salvage Value

The expected market value an asset will achieve when it is disposed of after its life cycle.

Payback Period

The length of time it takes for an investment to recover its initial cost out of the cash inflows that it generates.

Simple Rate of Return

A method of investment appraisal that calculates the annual incremental net operating income as a percentage of the initial investment.

Cash Operating Costs

Costs that a company incurs during its normal business operations, paid in cash, such as wages, utilities, and rent.