If a Price Ceiling Were Established Above the Equilibrium Price

question 304

Multiple Choice

If a price ceiling were established above the equilibrium price,

• A) it would have no effect on the quantity demanded.
• B) it would create a shortage.
• C) it would create a surplus.
• D) none of the above.

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Definitions:

Four-Firm Concentration Ratio

An economic measure that assesses the concentration of business within an industry, represented by the combined market share of the four largest firms.

Effective Cartel

An organization of producers that agree to coordinate prices and production to monopolize a market or maximize collective profits.

Pure Monopoly

A market structure where a single seller dominates the market, there are no close substitutes for the product, and barriers to entry are high, preventing competition.

Oligopolistic Industry

An industry characterized by a small number of firms controlling the majority of the market share, leading to limited competition.