A Price Ceiling

question 405

Multiple Choice

A price ceiling

• A) makes it illegal to charge a higher price than the specified price.
• B) is more effective when it is higher.
• C) is necessary to maintain market equilibrium.
• D) occurs in housing markets only.

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Definitions:

Increasing-cost Industry

An industry in which the costs of production increase as the industry expands, often due to limitations in resources or factors of production.

Long-run Supply Curve

A graphical representation showing the relationship between price and quantity supplied over a longer period, when all inputs can be varied.

Perfectly Elastic

Describes a situation in which the quantity demanded or supplied changes by an infinite amount in response to any price change, depicted as a horizontal line on a graph.