Question

An effective price ceiling is best defined as a price: A. imposed by government below equilibrium price. B. imposed by government above equilibrium price. C. higher than any consumer is willing to pay. D. lower than any supplier is willing to sell.

Answer 1

Answer: An effective price ceiling is a price imposed by the government below the equilibrium price.

Explanation:

Price ceiling is a price control that is imposed by the government to curtail how high producers or suppliers charge price for a commodity or service. Price ceiling is used by the government to protect consumers from purchasing very high commodities. The very high prices of the good can be as a result of inflation, monopoly or investment bubble

For price ceiling to be effective, the price set must be below the equilibrium price (price set by the forces of demand and supply).