In Order to Be Effective, a Price Ceiling

question 146

Multiple Choice

In order to be effective, a price ceiling

• A) must be set above equilibrium price.
• B) must be set below equilibrium price.
• C) must be set at equilibrium price.
• D) must be a zero price.

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Definitions:

Long-Run Average Total Cost Curve

A curve that shows the lowest possible cost of producing different levels of output when all factors of production, including capital, can be varied.

Unit Costs

The investment required by a company to develop, keep, and trade one instance of a specific product or service.

Plant Size

Plant size refers to the capacity or physical extent of a manufacturing or production facility, which impacts its output and efficiency levels.

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total cost, underscoring economies of scale.