When a Price Ceiling Is in Effect

question 43

Multiple Choice

When a price ceiling is in effect:

• A) there is no competition for goods.
• B) suppliers have an incentive to provide really good customer service.
• C) demanders compete for goods in short supply by accepting reductions in quality.
• D) suppliers compete for customers by inefficiently raising quality levels.

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Definitions:

Creditor

An entity (person or institution) that lends money or extends credit to another entity.

Investor

A person or organization that invests money anticipating financial gains in return.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.