Final answer:
The statement concerning the portrayal of high and low price levels on a diagram's vertical axis is true. A price floor affects the economy the most when it is set substantially above the equilibrium price, causing a surplus.
Step-by-step explanation:
The statement that a high price level is shown near the top of the axis, and a low price level is shown near the bottom, is true. In AD-AS (Aggregate Demand-Aggregate Supply) model diagrams, the vertical axis is used to measure the price level, including indicators such as the GDP Deflator or Consumer Price Index. The price level represents the average price of all goods and services produced in an economy. This is distinct from the inflation rate which is the rate of change of these prices over time. The horizontal axis typically represents real GDP, showing the output of an economy adjusted for inflation.
In the context of price floors, the most accurate statement is that a price floor will have the largest effect if it is set substantially above the equilibrium price. This is because when a price floor is set well above the equilibrium price, it results in a large surplus as suppliers produce more than consumers are willing to buy at that price. In contrast, price floors set slightly above, at, or below the equilibrium price have less of an impact, because the market price may naturally fall at or below these levels without any surplus being created.