Final answer:
A price floor has the largest effect when set substantially above the equilibrium price, leading to excess supply. A price ceiling has the largest effect when set substantially below the equilibrium, leading to a shortage. Both interventions cause disequilibrium in the market.
Step-by-step explanation:
The most accurate statement about the effect of a price floor is that it will have the largest effect if it is set substantially above the equilibrium price. A price floor is a government- or group-imposed price control that sets the minimum price at which a product can be sold. When a price floor is placed above the equilibrium price, it can lead to excess supply, as the higher price encourages producers to supply more while consumers will likely buy less. This can result in a surplus where the quantity supplied exceeds the quantity demanded.
Conversely, if a price floor is set at or below the equilibrium price, it will not have any effect, as the market price would naturally be at or above the floor. A price floor set slightly above the equilibrium might lead some to increase production minimally, but its impact is less compared to a substantial increase. In a similar vein, a price ceiling will have the largest effect if it is set substantially below the equilibrium price, causing a shortage as more consumers demand the product at lower prices while producers are less willing to supply it.