AP Microeconomics : Price Equilibrium

Study concepts, example questions & explanations for AP Microeconomics

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Example Questions

Example Question #14 : Ap Microeconomics

A price ceiling that is set above the market equilibrium price is likely to have which of the following effects, if any?

Possible Answers:

No effect; price will equal market equilibrium price.

No effect; price will never equal market equilibrium price

A surplus

A shortage

Correct answer:

No effect; price will equal market equilibrium price.

Explanation:

If a price ceiling is set above market equilibrium, market forces will cause the equilibrium price to be market equilibrium price. The price ceiling will never be reached because it is too high.

To create an effective price ceiling, on the other hand, the price ceiling must be set below market equilibrium price, thus stopping price levels before they can reach market equilibrium. In such a case, a shortage is expected.

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