If There Is a Price Ceiling Set for Milk at $2.50

question 60

Multiple Choice

If there is a price ceiling set for milk at $2.50 per gallon and the current equilibrium price is $2.25 per gallon,then we can conclude

• A)That the price ceiling is doing its job,keeping prices low
• B)That the price ceiling is non-binding and has no effect on the market equilibrium
• C)That milk imports are reducing the price
• D)That grocery stores are afraid to raise the price to the ceiling level,for fear of prosecution by the government
• E)That price ceilings set a minimum price

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Definitions:

Profit Maximization

The procedure through which a business identifies the pricing and production volume that yields the highest earnings.

Market Price

The price at which a good or service is offered in the marketplace.

Profit Maximization

A rephrased definition: The strategy or aim of a firm to achieve the highest profit possible, usually by adjusting outputs, prices, or production costs.

Market Price

The current price at which an asset or service can be bought or sold in the open market.