10
QuizMultiple Choice

Economic Decision-Making and Microeconomics — Test

Question 10 • Personal Finance and Economics

Which statements correctly explain price floors and price ceilings? Choose four correct answers.

Answer
A
Effective price ceilings are set below equilibrium.
B
Price ceilings help consumers by lowering prices.
C
Effective price floors are set above equilibrium.
D
Ineffective price ceilings tend to be too low.
E
Price floors help producers by raising prices.
F
Ineffective price floors tend to be too high.

Explanation

A price floor sets a minimum price, so it can raise the price producers receive; to affect the market, it must be above equilibrium. A price ceiling sets a maximum price and must be below equilibrium to lower the price consumers pay. Thus, statements A, C, D, and E are correct. Floors below equilibrium and ceilings above equilibrium are ineffective, so B and F are incorrect.

AI-written and checked against the verified answer.

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