A Price Ceiling That Is Set at $8 in the Market

question 98

Multiple Choice

A price ceiling that is set at $8 in the market shown in the graph is:

• A) non-binding and would not affect the market.
• B) binding and would cause a shortage.
• C) binding and would cause excess supply.
• D) non-binding and would not prevent the market from reaching equilibrium.

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Definitions:

Nominal Exchange Rate

The rate at which currencies are traded in the foreign exchange market, not considering differences in price levels between countries.

Domestic Price

The price of a good or service within a specific country, distinct from its price in international markets.

Depreciate

The process by which an asset's value decreases over time due to use, wear and tear, or obsolescence.

Euros/Dollar

The exchange rate between the euro and the U.S. dollar, indicating how much one euro is worth in U.S. dollars or vice versa.