If a Price Ceiling Is Set Above the Equilibrium Price

question 77

Multiple Choice

If a price ceiling is set above the equilibrium price, then

• A) there will be neither a shortage nor a surplus of the good.
• B) the price ceiling affects suppliers but not demanders.
• C) the price ceiling will generate revenue for the government.
• D) there will be a shortage of the good.
• E) there will be a surplus of the good.

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Definitions:

Overhead Rate

A method for distributing overhead expenses to goods or services, usually depicted as a ratio or percentage.

Direct Labour

The labor costs of employees who are directly involved in the manufacturing or production process of goods.

Inventories

Assets held for sale in the ordinary course of business, or goods that will be used or consumed in the production of goods to be sold.

Trade Discounts

Discounts from the list price of a product given by a seller to a buyer, often based on the volume of purchase or early payment.