A Non-Binding Price Ceiling

question 87

Multiple Choice

A non-binding price ceiling
i.causes a surplus.
ii.causes a shortage.
iii.is set at a price above the equilibrium price.
iv.is set at a price below the equilibrium price.

• A) (i) only
• B) (iii) only
• C) (i) and (iii) only
• D) (ii) and (iv) only

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Definitions:

Initial Endowment

The initial quantity of goods, services, or resources an individual, firm, or economy possesses.

Pareto Efficient

A state of allocation where it is impossible to make any one individual better off without making at least one individual worse off.

Utility Function

A mathematical representation that ranks the preferences of an individual consumer for different bundles of goods.

Initial Endowment

The original allocation of resources, including assets and goods, available to an individual or entity at the start of an economic analysis.