16
QuizMultiple Choice

Elasticity and Incentives — Quiz

Question 16 • Economics

What is the difference between a price floor and a price ceiling?

Answer
A
A price ceiling below the equilibrium price has no effect.
B
A price floor above the equilibrium price has no effect.
C
A price floor is the maximum price allowed for a good. A price ceiling is the minimum price allowed for a good.
D
A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.

Explanation

A price floor sets the lowest legal price sellers may charge, while a price ceiling sets the highest legal price buyers may be charged. Therefore, choice B correctly describes the difference. Choices A and C incorrectly describe when these controls have no effect, and D reverses the definitions.

AI-written and checked against the verified answer.

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