In one version of the experiment, the professor plans to put a ceiling of $11 on prices. That is,...

Question:

In one version of the experiment, the professor plans to put a ceiling of $11 on prices. That is, no one will be permitted to submit a bid or an asking price greater than $11.

Will this be a binding price ceiling? That is, will the price ceiling affect the prices that buyers and sellers agree to when they trade?

A. Yes B. No

The professor changes her mind and imposes a price floor of $11 on prices. No one is permitted to submit a bid or an asking price lower than $11.

Will this be a binding price floor? That is, will the price floor affect the prices that buyers and sellers agree to when they trade?

A. No B. Yes

Price Ceiling and Price Floor:

The price ceiling is the maximum price that a seller could charge and the price floor is the minimum price that could be charged. The price ceiling aims to benefits consumers and the price floor aims to benefits producers.

Answer and Explanation:

A binding price ceiling is a price that is below the market equilibrium price and a binding price floor is a price that is above the market...

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Price Ceilings and Price Floors in Microeconomics

from Economics 101: Principles of Microeconomics

Chapter 2 / Lesson 8
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