Which statements correctly explain price floors and price ceilings? Choose four answers.Ineffective price floors tend to be too high.Ineffective price ceilings tend to be too low.Price floors help producers by raising prices.Price ceilings help consumers by lowering prices.Effective price floors are set above equilibrium.Effective price ceilings are set below equilibrium.
Answer
I
Ineffective price floors tend to be too high.
I
Ineffective price ceilings tend to be too low.
P
Price floors help producers by raising prices.
P
Price ceilings help consumers by lowering prices.
E
Effective price floors are set above equilibrium.
E
Effective price ceilings are set below equilibrium.
Explanation
A price floor affects the market only when it is set above the equilibrium price; then it raises the price and can benefit producers. A price ceiling affects the market only when it is set below equilibrium; then it lowers the price and can benefit consumers. Floors set too low and ceilings set too high do not constrain the equilibrium price, so statements A and B are incorrect.
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