Suppose a Price Ceiling Is Set Above the Equilibrium Price

question 229

Multiple Choice

Suppose a price ceiling is set above the equilibrium price. Now suppose that policy makers decide to raise the price ceiling. This increase in the price ceiling will cause which of the following to occur?

• A) The surplus in the market will increase.
• B) The surplus in the market will decrease.
• C) The shortage in the market will increase.
• D) None of the above.

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Definitions:

Break-Even Sales

The amount of revenue required to cover both the variable and fixed costs of a business, resulting in neither profit nor loss.

Margin Of Safety

The difference between actual sales and sales at the break-even point, providing a cushion that measures the business's ability to withstand sales fluctuations.

Current Sales

The total revenue generated from goods or services sold by a company during the current period.

Break-Even Sales

The amount of revenue required to cover both the fixed and variable costs of a business, indicating the point at which profit starts to be generated.