Question

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:a. minimum wage law.b. fair wage law.c. price ceiling.d. black market price.e. ration price.

Answer 1

The correct answer is c. price ceiling.

Step-by-step explanation:

Price set by the government below the market equilibrium point and which in theory tends to correct that situation, benefiting consumers; arises from political considerations regarding the inadequacy of said price. Means should be administered to alleviate the shortage resulting from excess demand; A predictable consequence is the appearance of the so-called “black market”.

Another type of price control is the establishment of a minimum price. This system has been used frequently in agricultural markets, when the State has sought to prevent farmers' income from drastically reducing.

When a minimum price is established higher than what would take place in the market, the quantity offered exceeds the defendant, thus producing an excess supply. This excess supply will lead to an accumulation of production that will generate great inefficiency.