Price Ceilings and Price Floors That Are Binding

question 189

Multiple Choice

Price ceilings and price floors that are binding

• A)are desirable because they make markets more efficient and more fair.
• B)cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.
• C)can have the effect of restoring a market to equilibrium.
• D)are imposed because they can make the poor in the economy better off without causing adverse effects.

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Definitions:

Average Variable Cost

The variable cost (costs that change with production volume) divided by the quantity of output produced.

Marginal Cost

The increase or decrease in the total cost incurred by producing one additional unit of a product or service.

Total Variable Costs

The sum of expenses that vary directly with the level of output production.

Average Total Cost

The per unit cost of production, calculated by dividing total cost by the total quantity of output produced.