In Competitive Markets,binding Price Floors and Binding Price Ceilings Lead

question 11

Multiple Choice

In competitive markets,binding price floors and binding price ceilings lead to

• A)a reduction in deadweight loss.
• B)fairer prices for consumers and producers,and therefore are better for society as a whole.
• C)an overall increase in economic surplus,and therefore to market efficiency.
• D)a maximization of economic surplus.
• E)an overall reduction in economic surplus,and therefore to market inefficiency.

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Definitions:

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Net Present Value Method

A financial analysis technique used to assess the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Future Cash Inflows

Expected cash receipts or revenues generated from business activities in future periods.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.