The Shortages Associated with a Binding Price Ceiling Will Be

question 12

Multiple Choice

The shortages associated with a binding price ceiling will be the smallest when

• A)both supply and demand are highly elastic.
• B)both supply and demand are highly inelastic.
• C)supply is highly elastic and demand is highly inelastic.
• D)supply is highly inelastic and demand is highly elastic.
• E)none of the above-the size of the shortage has nothing to do with demand and supply elasticities.

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Definitions:

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes involved in maintaining the operation.

Operating Loss

A financial metric representing the negative balance resulting from a company's operating expenses exceeding its revenues.

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced, such as raw materials and labor expenses.

Fixed Costs

Expenses that remain constant regardless of the amount of output or sales, including costs like lease payments, wages, and insurance premiums.