A Price Ceiling Imposed on a Monopoly May

question 84

Multiple Choice

A price ceiling imposed on a monopoly may:

• A)lead to a shortage.
• B)lead to no shortage.
• C)drive the monopolist out of business.
• D)all of the statements associated with this question are correct.

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Definitions:

Binding Price Floor

A government-imposed price control that sets the minimum price above the equilibrium price, causing a surplus in the market.

Deadweight Loss

An economic inefficiency caused by a deviation from the optimal allocation of resources, often resulting from market distortions like taxes or subsidies.

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market equilibrium price.

Binding Price Floor

A legally established minimum price above the equilibrium price, causing a surplus in the market.