Price floors and price ceilings A. reduce consumer surplus and increase producer surplus. B. reduce producer surplus and increase consumer surplus. C. always reduce total surplus. D. Not enough information to determine.

Question

Business

Jaden Brady

7 February, 18:35

Price floors and price ceilings A. reduce consumer surplus and increase producer surplus. B. reduce producer surplus and increase consumer surplus. C. always reduce total surplus. D. Not enough information to determine.

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Answers (1)

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Morrison · Answer 1

D. Not enough information to determine.

Explanation:

Price ceilings prevent a price from rising above a certain level.

When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result.

Price floors prevent a price from falling below a certain level.

When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result.

When government laws regulate prices instead of letting market forces determine prices, it is known as price control.