Read the two statements and choose the correct option.
I. A price floor set below the equilibrium price causes a surplus.
II. A price ceiling set above the equilibrium price causes a shortage.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

A floor below equilibrium does not bind: the market price is already above it. I is false.
A ceiling above equilibrium does not bind either. II is false.

Ten questions from Market Equilibrium & Price Controls, at your own pace.

Ten questions from Market Equilibrium & Price Controls, at your own pace.

Read the two statements and choose the correct option.I. A price floor set below the equilibrium price causes a surplus.II. A price ceiling set above the equilibrium price causes a shortage.