Price Ceiling and Price Floor Quiz

What is a price ceiling?

• The total cost of producing a product or service

• A government subsidy for a product or service

• A government-imposed limit on the price that can be charged for a product or service.

• The highest price that a consumer is willing to pay for a product

Explain the impact of a price ceiling on the market.

• A price ceiling has no impact on the market.

• A price ceiling leads to increased competition and lower prices in the market.

• A price ceiling creates shortages and inefficiency in the market.

• A price ceiling creates surplus and efficiency in the market.

What is a price floor?

• A type of dance move involving stomping on the floor

• The highest price that can be charged for a product

• A government- or group-imposed price control or limit on how low a price can be charged for a product.

• A type of flooring used in retail stores to display products

Describe the effects of a price floor on the market.

• It causes the price of the product to decrease.

• It leads to a surplus of the product in the market.

• It has no effect on the market.

• It leads to a shortage of the product in the market.

What happens when a price ceiling is set below the equilibrium price?

• Decrease in demand for the good or service

• Surplus of the good or service

• Shortage of the good or service

• No effect on the market

How does a price floor affect the quantity of goods traded in the market?

• It increases the quantity of goods traded

• It has no effect on the quantity of goods traded

• It only affects the quality of goods traded

• It decreases the quantity of goods traded

What are the goals of implementing a price ceiling?

• Make goods and services more expensive for consumers and allow prices to rise too high

• Reduce the availability of goods and services for consumers and allow prices to rise too high

• Make goods and services more affordable for consumers and prevent prices from rising too high

• Make goods and services more affordable for consumers and encourage prices to rise too high

Discuss the consequences of a price floor being set above the equilibrium price.

• Surplus of the good or service

• Increase in price of the good or service

• Decrease in demand for the good or service

• Shortage of the good or service

Compare and contrast the impacts of price ceilings and price floors on consumer surplus and producer surplus.

• Price floors lead to a decrease in producer surplus and an increase in consumer surplus

• Price ceilings and price floors have no impact on consumer and producer surplus

• Price ceilings lead to an increase in producer surplus and a decrease in consumer surplus

• Price ceilings lead to a decrease in producer surplus and an increase in consumer surplus, while price floors lead to an increase in producer surplus and a decrease in consumer surplus.

Suppose the government sets a price ceiling of $80. How large will the shortage be?

• 5 million coats

• 4 million coats

• 3 million coats

• 2 million coats