ECONOMICS
PRICE CEILINGS AND FLOORS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Damage done to the environment
|
|
|
people must spend extra time/money to find people to buy
|
|
|
suppliers provide a low-quality product
|
|
|
a black market emerges
|
Detailed explanation-1: -While they make staples affordable for consumers in the short term, price ceilings often carry long-term disadvantages, such as shortages, extra charges, or lower quality products. Economists worry that price ceilings cause a deadweight loss to an economy, making it more inefficient.
Detailed explanation-2: -Price ceiling is giving goods at a price that is fixed by government, the supplier cannot charge beyond that price. Hence, some price is charged even it is minimal but is not free of cost. Hence all the statements except D is incorrect.
Detailed explanation-3: -A price ceiling above the competitive equilibrium price will result in a surplus. A price ceiling below the competitive equilibrium price will result in a shortage.
Detailed explanation-4: -An effective price ceiling will lower the price of a good, which decreases the producer surplus. The effective price ceiling will also decrease the price for consumers, but any benefit gained from that will be minimized by the decreased sales due to the drop in supply caused by the lower price.