Price Ceilings Create Five Important Effects

question 138

Multiple Choice

Price ceilings create five important effects:

• A)shortages, reductions in product quality, wasteful lineups, a loss from gains to trade, and a misallocation of resources.(True
• Answer )Correct
• B)surpluses, increases in product quality, search costs, gains from trade, and resource attrition.
• C)excess demand, long lines, poor service, efficiency, and arbitrage.
• D)shortages, reduced time costs, low vacancy rates, blat, and deadweight loss.

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Definitions:

Variable Costs

Variable costs are expenses that change in proportion to the activity of a business, such as sales volume or production levels.

Credit Terms

The conditions, including payment deadlines and interest rates, under which credit is extended to a borrower.

Aging Schedules

Timetables in accounting that categorize a company's accounts receivable according to the length of time an invoice has been outstanding.

Overdue Accounts

Financial accounts or receivables that have not been paid by the due date.