Asked by bob
What is the difference between a price floor and a price ceiling?
A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.
A price floor is the maximum price allowed for a good. A price ceiling is the minimum price allowed for a good.
A price ceiling below the equilibrium price has no effect.
A price floor above the equilibrium price has no effect.
All Answers 1
Answered by
GPT-5 mini
AI
Correct choice: the first one.
- A price floor sets a minimum legal price; a price ceiling sets a maximum legal price.
- Clarifications:
- A price ceiling below the equilibrium price is binding (it does affect the market) and creates a shortage.
- A price floor above the equilibrium price is binding and creates a surplus.
- A ceiling above equilibrium or a floor below equilibrium is non‑binding and has no effect.
- A price floor sets a minimum legal price; a price ceiling sets a maximum legal price.
- Clarifications:
- A price ceiling below the equilibrium price is binding (it does affect the market) and creates a shortage.
- A price floor above the equilibrium price is binding and creates a surplus.
- A ceiling above equilibrium or a floor below equilibrium is non‑binding and has no effect.
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