The Government Imposes a Price Ceiling on Sugar That Is

question 23

Multiple Choice

The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

• A) using rationing coupons that cannot be resold.
• B) using rationing on a first-come, first-served basis.
• C) using rationing coupons that can be resold.
• D) that no rationing system will be necessary.

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Definitions:

Cost of Debt

The cost of debt is the effective rate that a company pays on its borrowed funds, accounting for interest expenses on all debts.

AA Rated

A credit rating given to bonds that indicates a very low risk of default and high level of creditworthiness.

Finance Expansion

The process of securing funds to increase business operations, typically through loans, equity financing, or reinvestment of profits.

Embedded Debt Cost

The implicit interest rate or cost present in an obligation that may not be evident as a direct interest rate.