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A legal maximum on the price at which a good can be sold is called a Group of answer choicesprice ceiling.price directive.price window.price floor.

Question

A legal maximum on the price at which a good can be sold is called a

  • Group of answer choices
    • price ceiling.
    • price directive.
    • price window.
    • price floor.
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Solution

Answer

The correct term for a legal maximum on the price at which a good can be sold is a price ceiling.

In economic terms, a price ceiling is established by the government to prevent prices from rising above a certain level, often to make essential goods more affordable for consumers. For instance, rent controls in housing markets can be seen as a form of price ceiling, where the government limits the amount landlords can charge for rent. This mechanism can lead to shortages if the ceiling is set below the market equilibrium price, causing demand to exceed supply. The other options, such as "price directive," "price window," and "price floor," do not correctly describe this concept.

In summary, the answer is price ceiling.

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