When an Effective Price Ceiling Is in Place

question 55

Multiple Choice

When an effective price ceiling is in place:

• A) every consumer is better off.
• B) every consumer is worse off.
• C) some consumers are better off and others are worse off.
• D) on average the net change in consumer surplus is zero.

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Definitions:

Income Taxes

Taxes levied by a government directly on income, especially an annual tax on personal or corporate earnings.

Sunk Costs

Sunk costs are expenses that have already been incurred and cannot be recovered.

Opportunity Costs

The forfeiture of possible benefits from different options when selecting one option over the others.

Terminal Cash Flow

The net cash flow received or paid at the end of a project's life, including salvage value and net working capital recovery.