If a Price Ceiling Were Established Above the Equilibrium Price

question 304

Multiple Choice

If a price ceiling were established above the equilibrium price,

• A) it would have no effect on the quantity demanded.
• B) it would create a shortage.
• C) it would create a surplus.
• D) none of the above.

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Definitions:

Net Sales

The total revenue from sales after subtracting returns, allowances for damaged or missing goods, and discounts.

Return On Common Stockholders' Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders' equity, indicating the profitability of a company from the common shareholders' perspective.

Net Income

The remaining earnings of a corporation after deducting all costs, taxes, and expenses from its gross revenue.

Common Stock

A type of equity security that represents ownership in a corporation, entitling shareholders to vote on corporate matters and possibly receive dividends.