Assume There Is a Price Ceiling Imposed on a Good

question 168

Multiple Choice

Assume there is a price ceiling imposed on a good which is below the equilibrium price. Which of the following changes would reduce the size of the surplus?

• A)​An increase in demand.
• B)​A decrease in demand.
• C)​An increase in supply.
• D)​None of the above; there is no surplus.

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Definitions:

Common Stock

Equity ownership in a corporation, with voting rights and the potential to receive dividends.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Stock Dividend

The payment of additional shares to shareholders instead of cash, usually at a fixed rate, often used by companies to conserve cash.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.