Final answer:
A price floor set substantially above the equilibrium price and a price ceiling set substantially below it will have the largest effects, causing surplus and shortages respectively.
Step-by-step explanation:
Identifying the Largest Effect of Price Controls on Markets
The statement that is most accurate regarding the effect of a price floor is that it will have the largest effect if it is set substantially above the equilibrium price.
When a price floor is set above the equilibrium, it becomes a binding constraint on the market, leading to excess supply as producers are willing to supply more at the higher price, but consumers are not willing to buy as much.
Similarly, a price ceiling will have the largest effect if it is set substantially below the equilibrium price, resulting in a shortage as more consumers demand the product at the lower price, but producers are not willing to supply enough.
In the case of price floors, setting them above the equilibrium price will create a surplus where the quantity supplied exceeds the quantity demanded.
On the other hand, setting them below the equilibrium price will generally be nonbinding and therefore irrelevant, since the market price naturally moves toward the equilibrium price without interference.
For price ceilings, setting them below the equilibrium price leads to shortages and potentially a black market, whereas setting them above equilibrium will not impact the market as the natural market forces are allowed to dictate pricing.